The UAE has scrapped value-added tax on crypto transfers and conversions, a landmark move retroactive to 2018. Virtual asset companies can now recover previously paid VAT and benefit from the country’s evolving crypto-friendly tax landscape.

UAE Exempts Crypto Transfers and Conversions from VAT

Virtual currency (crypto) and its conversions will be free of UAE value-added tax (VAT) thanks to recent rule changes.

The Federal Tax Authority (FTA) of the United Arab Emirates (UAE) released revised value-added tax regulations on October 2. The new regulations exempt certain services from value-added tax, including investment fund management and the transfer and conversion of virtual assets, according to PwC, a business consultancy.

Retroactive VAT Exemptions Boost Virtual Asset Firms

As of January 1, 2018, the exemptions regarding the transfer and conversion of virtual assets will be implemented retroactively, according to PwC.

“Representation of value that can be digitally traded or converted and can be used for investment purposes” is how the auditing firm characterized virtual assets in the UAE. Nevertheless, monetary assets and fiat currencies are omitted from the concept.

Virtual Asset Companies Can Reclaim VAT Paid

Businesses involved with virtual assets should review the impact of the exemption on their VAT situation going backwards, according to the auditing firm. In addition, PwC stressed the need for input tax recovery for virtual asset companies.

According to Finanshels, a tax and accounting firm based in the United Arab Emirates, registered firms can get their money back for VAT they've previously paid on certain purchases.

Voluntary Disclosures Could Impact Historical Results

Furthermore, PwC stated that virtual asset companies may need to voluntarily disclose information in order to fix their historical results.

According to Cointelegraph, the United Arab Emirates has been modernizing and simplifying its regulations on virtual assets, in addition to VAT exemptions.

VASPs in Dubai Gain Dual Registration Benefits

Virtual asset service providers (VASPs) will be jointly supervised by the Securities and Commodities Authority (SCA), the federal financial agency of the United Arab Emirates, and Dubai's Virtual Asset Regulatory Authority (VARA) as of September 9.

As a result of the agreement, VASPs in Dubai who choose to obtain a license from VARA can also choose to be automatically registered with the SCA, allowing them to service the rest of the UAE.

Tougher Advertising Laws for Crypto Investments

The laws governing cryptocurrency advertising have been strengthened by VARA as well. The regulator stated on September 26 that businesses advertising digital asset investments should prominently display a disclaimer.

“Virtual assets may lose their value in full or in part and are subject to extreme volatility.” This is the disclaimer that needs to be included.