The United Arab Emirates (UAE) has announced an exemption of crypto transfers and conversions from Value Added Tax (VAT). The Federal Tax Authority (FTA) of the UAE published amendments to its VAT regulations on October 2, 2024, granting a VAT exemption for digital asset transactions, including Bitcoin.

According to PwC, a consultancy firm, the exemptions apply retrospectively, beginning on January 1, 2018. The amendments also introduce VAT exemptions for additional services such as managing investment funds, further positioning the UAE as a supportive hub for Bitcoin-related business activities.

The updated regulations define virtual assets as digital representations of value that can be traded or converted digitally, used for investment purposes. This definition excludes fiat currencies or financial securities, which are still subject to VAT.

Virtual asset businesses operating in the UAE are advised to reassess their VAT positions, as the exemption could affect their tax recovery on previous transactions. Additionally, companies may need to file voluntary disclosures to correct their historic tax filings if VAT was applied to these transactions.

The VAT exemption is one of several recent steps taken by UAE regulators to streamline the virtual asset industry. In September, Dubai's Virtual Asset Regulatory Authority (VARA) and the UAE's Securities and Commodities Authority (SCA) agreed to supervise virtual asset service providers (VASPs) jointly. This agreement allows firms licensed in Dubai to operate across the broader UAE, streamlining operations for Bitcoin businesses.

The UAE continues to position itself as a key player in the global digital asset space. The move could attract more businesses to set up operations in the UAE, capitalizing on the country’s progressive stance toward the Bitcoin industry.

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