In the UAE crypto assets and investment funds are exempt from VAT

The Federal Tax Administration of the United Arab Emirates (FTA) has amended the country's tax legislation, establishing that the transfer and conversion of cryptocurrencies is no longer subject to value added tax. These amendments begin to take effect retroactively, starting in 2018, and relate to regulation in the field of virtual assets. In addition, the management of investment funds is also exempt from VAT, but the decision will take effect from mid-November.

What is the news?

The cancellation of contributions for fund owners implies that the service provided to other organizations, regardless of the form of payment and if licensed, is no longer subject to monetary collection. This includes managing the internal processes of the fund, its investments, monitoring and improving the efficiency of operations.

The exemption of virtual assets from deductions concerns digital equivalents of value that can be sold or exchanged in digital format and used for investment purposes, excluding fiat currencies, official financial securities. Thus, transactions, transfer and exchange of ownership rights to such assets, including those outside the scope of VAT.

This change assimilates the cryptocurrency sector to generally accepted financial services, which are not subject to duties in the UAE. Prior to this decision, the tax was 5%.

Why have these amendments been introduced?

The abolition of VAT for cryptocurrency transactions shows the increased recognition of crypto assets in the Emirates, equating them with fiat money and financial instruments. The innovation reduces the cost of making payments in a country that is an impressive and neutral financial center. These changes are beneficial for the Russian market, as well as for foreign firms that are under sanctions, as they reduce the likelihood of new fines. Accordingly, these changes enhance the attractiveness of the United Arab Emirates for international business.

In addition, the abolition of the tax has become part of the country's strategy to reduce the tax burden for companies. Low duties and their absence in some sectors previously led to the state being included in the «‎gray list» of the Anti-Money Laundering Measures Development Group. Having fulfilled the necessary conditions, the Emirates withdrew from the list and restored a favorable tax policy for enterprises.

Pay attention!

Russian President Vladimir Putin has approved a law allowing external payments in cryptocurrency, as well as legalizing the mining of cryptocurrencies in the country. According to this law, mining is allowed for legal entities and individual entrepreneurs included in a special register.

Previously, the United Arab Emirates entered the top 3 countries in the world in terms of cryptocurrency adoption. Along with the UAE, Singapore and Turkey also joined the top three. There was also news recently that Dubai is introducing golden visas for game developers.