Étienne Girard
The United Arab Emirates (UAE) has introduced significant changes to its value-added tax (VAT) regulations, specifically exempting transactions involving virtual assets such as cryptocurrencies. These amendments were announced on October 2, 2024, by the UAE’s Federal Tax Authority (FTA) under Cabinet Decision No. (100) of 2024. The new rules will take effect on November 15, 2024.
One of the most important changes is found in Article 42, which outlines the VAT exemption for transferring ownership of virtual assets and converting them. The FTA has clarified that virtual assets are defined as digital representations of value that can be traded or used for investment purposes. These assets are clearly distinguished from traditional fiat currencies and financial securities.
The amendments are also retroactive, applying from January 1, 2018. As a result, businesses involved in virtual asset transactions must reassess their VAT obligations for past transactions that may now be affected by the new regulations. The FTA encourages these businesses to review their VAT recovery positions and ensure compliance with the updated rules. In some cases, voluntary disclosures may be required to rectify past VAT returns.
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Impact on Dubai’s Regulatory Environment
These changes to the VAT regulations come as Dubai continues to strengthen its regulatory framework for the virtual asset sector. In 2022, Dubai was one of the first regions in the Middle East to implement clear guidelines for Web3 companies. The Virtual Asset Regulatory Authority (VARA), which oversees digital asset operations in Dubai, recently introduced updated marketing regulations for Virtual Asset Service Providers (VASPs).
New Marketing Rules for Virtual Assets
Under VARA’s new guidance, all marketing materials related to digital assets must include clear disclaimers, warning investors about the potential financial risks associated with these highly volatile assets. As of October 1, 2024, any promotional content must state that virtual assets are subject to significant price fluctuations and could lose their value, either partially or entirely.
The disclaimers must be prominently displayed and easily understandable across all devices, ensuring transparency and protecting consumers from misleading information. These rules aim to discourage risky trading behavior by making investors more aware of the potential dangers involved in digital asset investments.
The UAE’s VAT amendments and Dubai’s updated regulations for the virtual asset sector reflect the country’s commitment to providing clarity and consumer protection in the rapidly evolving digital economy. These measures are designed to promote transparency, align tax laws with emerging trends, and regulate the growing virtual asset industry responsibly.
