The United Arab Emirates (UAE) has announced a significant change in its value-added tax (VAT) regulations, exempting transactions involving virtual assets, including cryptocurrencies. The amendments, retroactive from January 1, 2018, will come into effect on November 15, 2024, according to the UAE’s Federal Tax Authority (FTA).

Key Amendments in VAT Law

Under Cabinet Decision No. (100) of 2024, Article 42 adds a VAT exemption for the transfer of ownership and conversion of virtual assets. The FTA defines these assets as digital representations of value used for trade or investment purposes, distinguishing them from traditional currencies or securities.

Retroactive Impact on Businesses

The changes mean businesses involved in virtual asset transactions since 2018 must reassess their VAT obligations. The FTA has advised these businesses to evaluate their VAT recovery status and consider making voluntary disclosures if previous tax filings were incorrect.

This tax change aligns with Dubai’s broader efforts to regulate the virtual asset sector. In 2022, Dubai introduced clear guidelines for Web3 companies, with the Virtual Asset Regulatory Authority (VARA) overseeing digital asset activities in the city.

New Marketing Rules for Digital Assets

Alongside the VAT changes, VARA has also updated its marketing regulations. As of October 1, 2024, all promotional materials for virtual assets must include clear disclaimers, warning investors of the potential financial risks associated with these highly volatile assets. These disclaimers aim to ensure transparency and prevent misleading information in the fast-growing digital asset sector.

The UAE’s latest VAT amendments highlight the country’s proactive approach to regulating virtual assets while providing clarity for businesses operating in the sector.