The United Arab Emirates (UAE) has amended its value-added tax (VAT) regulations to exempt transactions involving virtual assets, including cryptocurrencies. On Oct. 2, 2024, the UAE’s Federal Tax Authority (FTA) announced the changes under Cabinet Decision No. (100) of 2024.
These amendments, effective November 15, 2024, are intended to bring clarity to the tax treatment of digital assets while aligning with previous updates to tax laws in the country. Among the key amendments, Article 42 stands out, adding the VAT exemption for transferring ownership of virtual assets and their conversion. The FTA defines virtual assets as digital representations of value that can be traded or used for investment purposes, clearly distinguishing them from fiat currencies or financial securities.
The changes are retroactive, taking effect from Jan. 1, 2018, and impacting all virtual asset transactions since then. This means that businesses dealing with virtual assets must reassess their VAT obligations, especially concerning retrospective transactions—those that took place in the past and are now affected by the new regulations.
The FTA has urged these businesses to reassess their VAT recovery position and compliance status, as well as consider the need for voluntary disclosures to rectify past returns if necessary. The UAE’s VAT amendments come against the backdrop of Dubai’s efforts to regulate the virtual asset sector.
In 2022, Dubai was among the first jurisdictions in the region to set out clear guidelines for Web3 firms. The Virtual Asset Regulatory Authority (VARA), which oversees digital asset activities in Dubai, recently updated its marketing rules for Virtual Asset Service Providers (VASPs).
Under the new guidance, all promotional content related to digital assets must carry clear disclaimers to warn investors of the potential financial risks. As of Oct. 1, any marketing material for digital assets must state that virtual assets are subject to significant volatility and may lose their value partially or entirely.
VARA notes these disclaimers should be prominently displayed and understandable across all devices, ensuring transparency and consumer protection. The new marketing rules are designed to prevent misleading information and ensure that the promotion of digital assets does not encourage risky trading behavior.
