The UAE has made a serious commitment to making the country increasingly attractive as a global cryptocurrency hub by announcing a massive tax exemption. From November 15, 2024, all transactions involving the exchange and conversion of cryptocurrency will be exempt from value added tax. It aims to attract both individual investors and institutional players looking for a tax-friendly environment, a statement from the federal tax authorities said.
Crypto transactions: new regulations
New law appears to break previous traditions of taxing crypto transactions at 5% VAT. The tax was considered an entry barrier for most potential investors and companies in the rapidly evolving digital asset space. By abolishing such taxes, the UAE is not only opening up the processes for current users but also inviting newcomers to explore the space.
BULLISH!!
🇦🇪 UAE ELIMINATES VAT (VALUE ADDED TAX) FOR ALL CRYPTO TRANSFERS.
THIS IS GREAT FOR PEOPLE AND BUSINESSES WHO WORK WITH DIGITAL ASSETS!
DON’T DARE SAY YOU’RE BEARISH. pic.twitter.com/5HlzKl6wcT
— Kyle Chassé / DD🐸 (@kyle_chasse) October 6, 2024
The FTA stated: “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 will boost the sector and further position the UAE as a leader in blockchain innovation.
Benefits for companies and investors
One of the most exciting aspects of this policy is its retroactive nature. This means that individuals and businesses that have paid VAT on cryptocurrency transactions since January 1, 2018 can now claim a portion of these refunds.
Total crypto market cap at $2.14 trillion on the 24-hour chart: TradingView.com
The amount could be a huge windfall for those who have been active in the crypto market in recent years. “Given the impact of these changes on a company’s VAT position, companies could reclaim a large portion of the tax paid in the past,” notes a business consultancy. PwC.
The exemption extends beyond transfers and conversions to the management of investment funds and the transfer of ownership of virtual assets. This will certainly attract crypto exchanges and entrepreneurs to the UAE and boost the digital economy.
Image: YourDictionary
UAE: Setting a precedent in the region
The UAE is making 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 USA, have taken more control measures, the UAE is taking action to create conditions conducive to innovation and investment and to keep pace with an already thriving tax culture.
This move could create a new benchmark for other countries to follow as they undertake similar tax reforms. Given that competition for crypto investments is increasing around the world, policies like this one from the UAE can then reflect on the homework done by other countries.
Featured image from Arabian Post, chart from TradingView