New tax legislation adopted by the United Arab Emirates (UAE) exempt cryptocurrency conversions and transfers from value-added tax (VAT). This step promotes digital asset transactions in the area and establishes the UAE as one of the world’s most crypto-friendly governments.
VAT-Exempt Transfers and Conversions of Digital Assets
The Federal Tax Authority (FTA) of the United Arab Emirates (UAE) announced changes to the nation’s VAT laws as of October 2, 2023. These changes especially remove the VAT on transfers and conversions of digital assets, such cryptocurrency. Leading business consultant PwC emphasised that exclusions for other financial services, such as handling virtual assets and managing investment money, are also included in this.
Application of VAT Exemptions Retroactively
PwC claims that the VAT exclusions on transactions involving virtual assets are retroactive, beginning on January 1, 2018. This implies that the exemptions will apply retrospectively to companies and people that transferred or converted cryptocurrencies during this time.
UAE’s Definition of Virtual Assets
According to PwC, digital representations of value that can be exchanged or converted digitally are categorised as virtual assets in the United Arab Emirates. It is also possible to employ these assets for investing. Nevertheless, fiat money and financial securities are not included in this definition. The company also suggested that companies review their VAT status and closely monitor their input tax recovery on transactions involving virtual assets.
VAT Recovery Input for Virtual Asset Companies
Businesses registered in the UAE are able to reclaim input VAT on their qualifying purchases, including those connected to transactions involving virtual assets, according to tax consultancy Finanshels, based in the United Arab Emirates. Businesses can recoup the VAT they have previously paid thanks to input VAT recovery. Businesses might have to submit voluntary disclosures, though, in order to amend any past filings pertaining to virtual assets.
Bolstering the cryptocurrency laws in the UAE
The United Arab Emirates has been actively improving its virtual asset regulation structure in addition to the VAT exemptions. The Securities and Commodities Authority (SCA), the federal financial body of the United Arab Emirates, and Dubai’s Virtual Asset Regulatory Authority (VARA) came to an agreement on September 9, 2023, to cooperatively monitor virtual asset service providers (VASPs). Through this collaboration, VASPs licensed by VARA in Dubai can now operate throughout the UAE by immediately registering with the SCA.
Tighter Rules Regarding Cryptocurrency Marketing
Tighter regulations on bitcoin marketing were implemented by VARA in addition to the supervisory agreement. Companies that advertise investments in digital assets will have to clearly state in their marketing materials as of September 26, 2023, that “virtual assets may lose their value in full or in part and are subject to extreme volatility.”
This set of legal changes demonstrates the UAE’s dedication to fostering the expansion of the cryptocurrency industry while making sure that extensive protections are in place for both investors and enterprises.
