The United Arab Emirates (UAE) is making significant strides in becoming a hub for cryptocurrency companies and investors, with Dubai and Abu Dhabi leading the way. One of the latest initiatives announced by the UAE is the exemption of cryptocurrency transfers from value-added tax (VAT), a move that is set to take effect on November 15.
This decision was made public by the Federal Tax Authority (FTA) through Cabinet Decision No. (100) of 2024, which updates the executive regulation related to VAT. The updated regulation includes more than 30 amendments that impact various industries, with a particular focus on the cryptocurrency sector.
According to details shared by business consultancy firm PwC, the VAT exemptions will apply to managing investment funds and other crypto-related activities. These exemptions will also be retroactively effective from January 1, 2018, for the transfer and conversion of virtual assets.
The UAE’s proactive approach towards embracing cryptocurrencies stands in contrast to countries like China and India, which have been more cautious in their adoption of digital currencies. The UAE has been actively working to create a conducive environment for blockchain and crypto businesses, with the Dubai Virtual Assets Regulatory Authority playing a key role in regulating virtual assets in the country.
The introduction of VAT exemptions for crypto transfers and conversions is expected to attract more cryptocurrency businesses to the UAE. This move aligns with the country’s positive outlook on cryptocurrencies, as evidenced by its significant growth in the market. According to a recent report by Chainalysis, the UAE received over $30 billion in cryptocurrency between July 2023 and June 2024, making it the third-largest crypto economy in the MENA region.
Chainalysis also noted the increase in venture capital funds and blockchain businesses in the UAE as contributing factors to the country’s thriving crypto ecosystem. With the new VAT exemptions in place, the UAE is poised to further solidify its position as a crypto-friendly destination for businesses and investors looking to capitalize on the growing digital asset market.
