UAE Removes VAT on Cryptocurrency Transfers and Conversions

Amendments to the United Arab Emirates’ value-added tax (VAT) regulations will now exempt the transfer and conversion of digital assets, including cryptocurrencies.

On October 2, the UAE’s Federal Tax Authority (FTA) introduced changes to the VAT framework. As reported by PwC, a global business consultancy, these updates include VAT exemptions for additional services, such as managing investment funds and facilitating the transfer and conversion of virtual assets.

Notably, PwC mentioned that the VAT exemptions related to the transfer and conversion of virtual assets are being applied retroactively, starting from January 1, 2018.

Input tax recovery for virtual asset companies
According to PwC, in the UAE, virtual assets are described as a “representation of value that can be digitally traded or converted and used for investment purposes.” However, this definition excludes fiat currencies and financial securities.

Businesses operating in the virtual asset space are encouraged to review the impact of the VAT exemption on their past VAT filings. PwC also emphasized that virtual asset firms should carefully consider their position regarding input tax recovery.

Local accounting firm Finanshels added that in the UAE, input VAT recovery allows registered businesses to claim back VAT paid on qualifying business expenditures.

Furthermore, PwC advised that any adjustments to previous tax returns due to these changes may necessitate voluntary disclosures from companies dealing in virtual assets.

UAE enhances regulations on crypto
Beyond VAT exemptions, the UAE has been actively refining and modernizing its regulatory framework for virtual assets.

On September 9, Dubai’s Virtual Asset Regulatory Authority (VARA) and the UAE’s Securities and Commodities Authority (SCA) reached an agreement to jointly oversee virtual asset service providers (VASPs).

This partnership means that VASPs licensed by VARA in Dubai can now extend their services across the UAE, as they will automatically be registered with the SCA.

In addition to this, VARA has strengthened regulations around the marketing of cryptocurrencies. On September 26, the authority stipulated that any firms advertising digital asset investments must include a clear disclaimer. This disclaimer should state that “virtual assets may lose their value in full or in part and are subject to extreme volatility.”

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