Starting November 15, the United Arab Emirates will exempt cryptocurrency transactions and conversions from Value Added Tax, or VAT. This applies to both individuals and businesses.
Changes in crypto regulations in the UAE
Before this tax exemption, the UAE imposed a 5% VAT on cryptocurrency transactions, similar to taxes on other commercial activities.
Of course, taxing cryptocurrencies was difficult due to their decentralized and pseudonymous nature.
The previous tax rules created obstacles for businesses and individuals wanting to enter the crypto market, but now the new exemption wants to encourage growth and attract more investment in this sector.
On October 2, the Federal Tax Authority of the UAE announced that cryptocurrency-related transactions, including transfers and conversions, will no longer incur VAT.
The crypto community understandably cheered the move.
“UAE (Dubai) just eliminated all taxes on crypto transactions. The US needs to follow if they want to be competitive.”
With this progressive regulatory framework, Dubai is becoming a global hub for cryptocurrency and blockchain technology, drawing in numerous companies and projects.
Not the first tax benefit for the crypto industry
Since January 1, 2018, the UAE has already offered VAT exemptions for investment fund management, asset transfers, and virtual asset conversions.
This means that individuals or businesses that paid VAT on cryptocurrency purchases or sales since then might be eligible for refunds from the government, but this process could require voluntary disclosures to the FTA.
This means that older transaction records will be examined, and some businesses may face penalties if any fraud is discovered.
Business-friendly place
If we take a look at Chainalysis’ data, we can see that between July 2023 and June 2024, the UAE received over $30 billion in cryptocurrency inflows, and this places the country among the top 40 globally for crypto inflows and makes it the third-largest crypto economy in the region.
The Chainalysis report also shows that the UAE is developing a diverse and growing cryptocurrency ecosystem.
The total value of DeFi services in the UAE has risen by 74% from last year, increasing from $2.3 billion to $3.4 billion.
Decentralized exchanges alone saw an impressive 87% increase in value, jumping from an estimated $6 billion to $11.3 billion.
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