UAE Drops Crypto Tax to Boost Growth

The UAE will exempt crypto transactions from Value Added Tax (VAT) starting November 15, 2024, aiming to boost the sector’s growth. This new policy removes the 5% VAT, making the UAE more attractive for cryptocurrency businesses and investors.

The policy shift is part of the UAE’s strategy to create a crypto-friendly environment, setting it apart from countries with stricter regulations. With this exemption, Dubai strengthens its position as a global hub for cryptocurrency and blockchain. Previously, the 5% VAT on crypto transactions created hurdles for businesses and individuals entering the market. The new exemption addresses these concerns, aiming to drive investment and growth.

The Federal Tax Authority (FTA) announced on October 2 that crypto transactions, including transfers and conversions, will no longer be subject to VAT. This move simplifies operations for both individuals and companies. The UAE has taken steps to create a progressive regulatory framework to attract crypto and blockchain projects. The country has already offered VAT exemptions for investment fund management and asset transfer since January 1, 2018.

With the new rules, those who paid VAT on cryptocurrency transactions since 2018 may be eligible for refunds, provided they disclose past records to the FTA. Businesses could face penalties if discrepancies or fraud are found. Crypto trader Borovik praised the policy, urging other nations like the US to adopt similar measures. He noted that “UAE just eliminated all taxes on crypto transactions. The US needs to follow if they want to stay competitive.”

The UAE’s crypto economy is already substantial, receiving over $30 billion in cryptocurrency from July 2023 to June 2024, making it the third-largest in the MENA region.

The Chainalysis report highlights the UAE’s growing DeFi services, which jumped by 74% to $3.4 billion this year. The value of decentralized exchanges (DEXs) alone surged 87%, reaching $11.3 billion. The new VAT exemption positions the UAE as a preferred destination for venture capitalists and blockchain businesses, supporting its ambition to become a leading crypto and blockchain hub in the coming years.