The United Arab Emirates (UAE), especially through its financial hubs in Dubai and Abu Dhabi, is solidifying its position as a global crypto hub with new regulations aimed at fostering a crypto-friendly environment. The latest development: the UAE has announced value-added tax (VAT) exemptions for cryptocurrency transfers and conversions, set to take effect on November 15, 2024.
On October 2, the Federal Tax Authority (FTA) published Cabinet Decision No. (100) of 2024, which updates the executive regulation on VAT. These changes include more than 30 amendments, impacting various sectors, including the growing cryptocurrency industry.
According to PwC, the VAT exemptions will apply not only to the management of investment funds but also to other crypto-related activities. Furthermore, PwC notes that the exemption for virtual asset transfers and conversions will be backdated, effectively applying from January 1, 2018.
In addition to these exemptions, the updated regulation also clarifies input tax recovery for cryptocurrency companies. The UAE classifies crypto as a “representation of value that can be digitally traded or converted and used for investment purposes.”
UAE’s Crypto-Friendly Stance
While countries like China and India are taking a cautious approach to crypto, the UAE is actively encouraging the growth of blockchain and cryptocurrency businesses. Dubai’s Virtual Assets Regulatory Authority (VARA) is playing a key role in shaping the regulatory landscape for virtual assets in the country.
The new VAT exemptions could further incentivize crypto companies to set up shop in the UAE, bolstering its position as a global leader in the crypto space. The nation’s welcoming attitude toward crypto is already evident from the market’s rapid expansion. A report from Chainalysis revealed that between July 2023 and June 2024, the UAE received over $30 billion in cryptocurrency, making it the third-largest crypto economy in the MENA region.
Additionally, the increasing number of venture capital funds and blockchain startups in the UAE is contributing to its impressive growth in the digital asset space.
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