Dubai and the United Arab Emirates (UAE) have always had a more positive and supportive attitude towards new ventures and the crypto industry. In addition to establishing the Virtual Asset Regulatory Authority (VARA), which is specifically responsible for supervising cryptocurrencies and related service providers, they also passed as early as 2022 Cryptocurrency law provides a clear legal framework for the crypto industry. Including Binance , Crypto.com and OKX have obtained their VASP licenses . According to the amendments to the value-added tax rules announced by the UAE Federal Tax Authority (FTA), the transfer and conversion of virtual assets can be exempted from value-added tax and will be applied retroactively from January 1, 2018. This may be another attractive factor for the crypto industry. Conditions of travel.

Transfers and conversions of virtual assets are exempt from VAT

The UAE Federal Tax Authority (FTA) has announced amendments to the country’s value-added tax rules. PricewaterhouseCoopers (PwC, whose entity in Taiwan is Zicheng LLP), one of the world's four largest accounting firms, said the new regulations include VAT exemptions for additional services, including managing investment funds and transferring and converting virtual assets. , and the exemption for virtual asset transfers and conversions will apply retroactively from January 1, 2018.

Note: Value-Added Tax (VAT) is a consumption tax mainly levied on the production, circulation and sale of goods or services. Suppose a company produces a product and sells it to a wholesaler for $100. This company needs to pay value-added tax. Assuming the tax rate is 10%, then the value-added tax is 10 yuan.

The definition of virtual assets is: digital transactions or conversions that can be used for investment purposes, but do not include digital forms of legal tender or financial securities.

PwC recommends that fund managers should analyze whether their services qualify for VAT exemption and the impact on their VAT recovery status. Funds purchasing services from fund management companies should also analyze whether the fund management services purchased qualify for the exemption, particularly if these services are purchased from outside the UAE. And these impacts, particularly in terms of input tax recovery. Voluntary disclosure by the business may be required to obtain an exempt refund from VAT that has previously been deducted.

Dubai partners with UAE to regulate VASPs

Additionally, UAE regulators have recently simplified and updated rules regarding virtual assets.

The Dubai Virtual Asset Regulatory Authority (VARA) and the UAE Federal Financial Institutions Securities and Commodities Authority (SCA) have entered into an agreement for their mutual regulation of virtual asset service providers (VASPs) operating in Dubai or wishing to provide services to Dubai. VASPs providing services in the Emirate need to be licensed by VARA and can be registered with the SCA by default to provide services to the wider UAE. The agreement also covers cooperation mechanisms for mutual supervision of VASPs, penalties and fines, exchange of information and statistical data, and employee training and qualification certification.