WEB3
by BSCN
October 7, 2024
The amendments clarify VAT provisions concerning virtual assets, defining them as digital representations of value that can be traded or converted for investment purposes.
The UAE's Federal Tax Authority (FTA) introduced critical amendments to the Executive Regulation of Federal Decree-Law No. 8 of 2017 on Value Added Tax (VAT). Through Cabinet Decision No. 100 of 2024, the UAE is set to exempt cryptocurrency transfers and conversions from VAT, effective November 15, 2024.
The definition of virtual assets is notably broad, encompassing “a digital representation of value that can be digitally traded or converted and used for investment purposes.” However, this definition explicitly excludes digital representations of fiat currencies or financial securities.
One of the most significant aspects of this decision is that the exemptions will apply retroactively from January 1, 2018. This retroactive effect requires businesses dealing in cryptocurrencies to reassess their VAT filings since that date.
Companies may find it necessary to file voluntary disclosures to correct previous tax returns, potentially affecting their overall tax liabilities.
Exempting cryptocurrency transactions from VAT aligns with the government's broader strategy to create a favorable climate for crypto-related businesses. Earlier this year, the Dubai Court of First Instance also permitted the payment of salaries in cryptocurrency.
The amendments come at a time when the UAE is witnessing rapid growth in its cryptocurrency economy. According to Chainalysis, from July 2023 to June 2024, the UAE received over $30 billion in cryptocurrency, ranking it among the top 40 countries globally for crypto inflows.
The UAE is now recognized as the third-largest crypto economy in the Middle East and North Africa (MENA) region. Decentralized finance (DeFi) services in the UAE have increased by 74% from the previous year, rising from $2.3 billion to $3.4 billion, according to the Chainalysis report. Notably, decentralized exchanges (DEXs) saw an even more impressive growth of 87%, escalating from approximately $6 billion to $11.3 billion.
As the United States prepares for Presidential elections, questions arise about possible tax reforms. Some crypto advocates hope that a new administration will recognize the advantages of reducing taxes on cryptocurrency operations.
Such changes could encourage innovation and attract investments, strengthening the U.S. position in the global crypto market. Currently, the U.S. employs a complex system of cryptocurrency taxation, often leading to confusion among investors and companies.
Disclaimer
Disclaimer: The views expressed in this article do not necessarily represent the views of BSCN. The information provided in this article is for educational and entertainment purposes only and should not be construed as investment advice, or advice of any kind. BSCN assumes no responsibility for any investment decisions made based on the information provided in this article. If you believe that the article should be amended, please reach out to the BSCN team by emailing [email protected].
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