- UAE has set up clear guidelines for crypto and Value-Added Tax (VAT) framework.
- Crypto-to-crypto transactions have been exempted from VAT.
- Personal mining and purchase of goods have also been exempted from VAT.
The United Arab Emirates (UAE) has become a welcoming destination for crypto companies, adopting a more crypto-friendly stance than the United States or the European Union. The country has also established clear guidelines for how crypto assets are treated under its Value-Added Tax (VAT) system.
Introduced in 2018, the VAT system has played a key role in the UAE’s economic development by providing revenue streams beyond oil trade. The VAT policies have been extended to the digital asset sector, with VAT applied when crypto is used to pay for goods and services.
These transactions are classified as barter transactions with a standard 5% VAT rate. Businesses must calculate VAT based on the AED value at the time of the transaction.
VAT Applicability in the UAE Crypto Sector
VAT applies to various crypto-related activities, including goods and services exchanged for crypto, crypto payments, commercial crypto mining, crypto wallet services, and digital asset trading platforms. However, some services are exempt from VAT for crypto investors and institutions.
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This clear VAT framework should help the digital asset sector grow in the UAE, attracting businesses that may be leaving countries like the US in search of more favorable regulations.
VAT Exemptions for Crypto Activities
The UAE has excluded several crypto activities from VAT, including crypto-to-crypto transactions and custody services. Personal crypto mining and staking, as well as tokens sold in Initial Coin Offerings (ICOs) before goods or services are delivered, are also exempt. However, crypto businesses are still subject to a 9% corporate tax on profits.
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This VAT framework provides legitimacy for crypto, putting it on par with traditional finance. The UAE has also set a precedent for other governments with its pro-crypto policies, including the approval of the first AED stablecoin.
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