The United Arab Emirates has introduced new tax amendments that exempt citizens and businesses from paying VAT on crypto transactions.
The changes were published by the Federal Tax Authority on Oct. 2, and apply to the transfer and conversion of digital assets.
The amendments, which are effective retroactively from January 2018, aim to simplify the tax process for crypto firms.
Crypto Firms Might Need To Voluntarily Disclose Records To Correct Past Tax Filings
According to business consultancy company PwC, the United Arab Emirates defines virtual assets as a “representation of value that can be digitally traded or converted and can be used for investment purposes.” This definition does not include financial securities or fiat currencies.
For fund managers who provide services to licensed investment funds in the United Arab Emirates, all investments, the management of fund operations and performance monitoring are now VAT exempt.
The new exemption also has an impact on the funds’ VAT recovery position, which could potentially lower the costs of managing clients’ investments.
Crypto businesses registered in the United Arab Emirates will now need to determine what effect the amendments will have on the VAT they are obligated to pay. Companies who previously paid VAT for virtual asset transactions might have to voluntarily disclose their records to correct their historic tax filings since Jan. 1, 2018.
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Regulators in the United Arab Emirates have been updating their rules around virtual assets in the last few months. The VAT amendments come after Dubai’s Virtual Asset Regulatory Authority (VARA) and the Securities and Commodities Authority agreed on Sept. 9 to mutually supervise virtual asset providers (VASPs).
On Sept. 26, VARA also updated its rules on crypto marketing. Crypto firms operating in the United Arab Emirates and who promote digital asset investments are now required to add a prominent disclaimer to all of their marketing material.
In their disclaimers, firms must say that “virtual assets may lose their value in full or in part and are subject to extreme volatility.”
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