The UAE Federal Tax Authority (FTA) published on October 2nd 2024 the amended version of the Executive Regulation of Federal Decree Law No. 8 2017 on Value added tax and has exempted virtual assets and investment fund management.
The amendments which are implemented following the Cabinet Decision No. (100) of 2024 will be effective from November 15th 2024.
These amendments aim to enhance clarity, provide further details on key provisions and procedures, and align with earlier changes in the Decree-Law and other relevant tax legislation.
When it comes to financial services, the decree noted that the management of investment funds and the transfer and ownership of virtual assets, including cryptocurrencies as well as conversion of virtual assets will be exempt from value added taxation. The exceptions on conversion of virtual assets and transfer and ownership of virtual assets are treated as effective from 1 January 2018.
According to PWC, the UAE has defined virtual assets as digital representation of value that can be digitally traded or converted and can be used for investment purposes and does not include digital representations of fiat currencies or financial securities.
PWC notes, “Businesses dealing with virtual assets should analyze the impact of the exemption on their (retrospective) VAT position, especially in respect to their input tax recovery. Voluntary disclosures may be required to correct historic returns.
PWC adds, “In particular fund managers, funds and companies dealing with virtual assets should assess whether their services are within the scope of the VAT exemption and also analyse the impact of that on the input tax recovery.”
According to the recent report from Henley&Partners the UAE leads in this year’s crypto adoption Index, as it is listed among top 12 countries while leading when it comes to public adoption, and innovation and technology. The report notes that one of the top reasons for UAE’s crypto growth is its low-tax jurisdiction which offers an attractive environment for crypto businesses.
For example, when it came to public adoption of crypto, the UAE ranked second following only USA. It is the only Arab country in the top 12 for this year. As per the Index findings, the UAE stands out as a leading jurisdiction for crypto investors. Public interest is high, with a substantial portion of the population owning cryptocurrencies. This enthusiasm is matched by strong government support and a thriving start-up scene.
