WILL THE VALUE ADDED TAX (VAT) APPLY TO VIRTUAL ASSETS IN THE UAE?

26 November 2024

Bini Saroj

The definition of virtual assets was introduced as a result of Cabinet Decision No. 100 of 2024 on the Federal Decree-Law No. 8 of 2017 on Value Added Tax.

Dubai: We would like to make clear that - digital representation of value that can be traded or converted digitally and can be used for investment purposes does not include digital representations of fiat currencies or financial securities -

·       Value Added Tax ("VAT") is not always waived for operations involving virtual assets.
Regardless of whether fiat money or virtual assets are used, the type of transaction determines whether a sale or buy is eligible for exemption.

·       A non-exhaustive list of financial services is provided in Article 42 of the Federal Decree-Law, which includes operations pertaining to credit provision and money transactions (or their counterparts).

·       The list of financial services has been enlarged by Article 42 in compliance with Cabinet Decision No. 100 of 2024. This includes:

o   i) the transfer of ownership of virtual assets, including virtual currencies;

o   ii) the conversion of virtual assets; and

o   iii) the maintenance, management, and facilitation of control over virtual assets.

·       Financial services are considered exempt from VAT if they are rendered without the expectation of a clear fee, commission, rebate, discount, or other comparable recompense.

Through Cabinet Decision No. 100 of 2024, the Federal Tax Authority has made it clear that transactions involving virtual assets would occasionally be VAT-exempt.

The Cabinet Decision took effect on November 15, 2024: Executive Regulation of Federal Decree Law No 8 of 2017 – Publish – 04 10 2024.pdf

ALKETBI TOUCH

Our team of experts will be assisting you should you need any further clarifications. Please do not hesitate to contact us for additional information regarding the effects of Cabinet Decision No. 100 of 2024.