The UAE has made a serious commitment to make it increasingly attractive as a global cryptocurrency hub by announcing a massive tax exemption. Starting November 15, 2024, all transactions involved in cryptocurrency exchange and conversion will be exempted from Value Added Tax. It aims at attracting both individual investors and institutional players who seek tax-friendly environments, according to a statement issued by the Federal Tax Authority.
Crypto Transactions: New Regulations
New law seems to break the previous traditions where crypto transactions were taxed at 5% VAT. The tax was considered an entry barrier for most potential investors and businesses in the rapidly changing digital asset space. With the removal of such taxation, the UAE is not merely opening the processes for the current users but also inviting newcomers to explore the space.
BULLISH!!
UAE ELIMINATES VAT (VALUE-ADDED TAX) FOR ALL CRYPTO TRANSFERS.
THIS IS HUGE FOR PEOPLE AND COMPANIES DEALING WITH DIGITAL ASSETS!
DON’T YOU DARE SAY YOU’RE BEARISH. pic.twitter.com/5HlzKl6wcT
— Kyle Chassé / DD
(@kyle_chasse) October 6, 2024
The FTA declared, “The UAE has exempted cryptocurrency transfers and conversions from value-added tax, positioning itself as a more crypto-friendly jurisdiction for digital asset transactions.” This forward-looking measure sets to boost the sector and further position the UAE as a forerunner in blockchain innovation.
Benefits For Businesses And Investors
One of the most exciting aspects of this policy is its retroactive nature. This, therefore, means that individuals and businesses that have been paying VAT on cryptocurrency transactions from January 1, 2018 could now claim some of these refunds.
The amount could be a huge windfall for those who have been active in the crypto market over the last few years. “Given the impact of these amendments on a firm’s VAT position, companies could recover a lot of tax paid in the past,” notes business consultancy firm PwC.
The exemption extends beyond transfers and conversions to investment fund management and virtual asset ownership transfers. This will certainly attract crypto exchanges and entrepreneurs to the UAE and boost its digital economy.
The UAE makes this move at a time when many other countries are still trying to find a way to regulate cryptocurrencies. While some of these countries, such as China and India, have taken more controlling measures, the UAE is acting to create conditions favorable to innovation and investment and to keep up with an already thriving tax culture.
This move may create a new benchmark for other countries to follow in similar tax reforms. Given that competition for crypto investment is heating up around the world, policies like these from the UAE can then reflect on the homework done by other countries.
Featured image from Arabian Post, chart from TradingView