The United Arab Emirates amendments to value-added tax (VAT) regulations will exempt transfers and conversions of virtual assets, including crypto.

On Oct. 2, the UAE’s Federal Tax Authority (FTA) published amendments to the country’s VAT rules. According to business consultancy company PwC, the new rules include VAT exemptions for additional services, including managing investment funds and transferring and converting virtual assets.

PwC noted that the exemptions in the transfer and conversion of virtual assets will be applied retrospectively from Jan. 1, 2018. 

Input tax recovery for virtual asset companies

The auditing firm explained that in the UAE, virtual assets are defined as a “representation of value that can be digitally traded or converted and can be used for investment purposes.” However, the definition does not include fiat currencies or financial securities. 

The auditing company advised businesses dealing with virtual assets to analyze the exemption on their retrospective VAT position. PwC added that virtual asset firms should pay special attention to their input tax recovery. 

UAE-based bookkeeping and tax company Finanshels said that in the UAE, input VAT recovery lets registered businesses claim back the VAT they have already paid on eligible business purchases. 

In addition, PwC said correcting historic returns may require voluntary disclosures from virtual asset companies.

Related: Middle East accounts for 7.5% of global crypto volume — Chainalysis

UAE enhances regulations on crypto

Apart from VAT exemptions, regulators in the UAE have recently been streamlining and updating their rules on virtual assets. 

On Sept. 9, Dubai’s Virtual Asset Regulatory Authority (VARA) and the Securities And Commodities Authority (SCA), the UAE’s federal financial agency, agreed on mutually supervising virtual asset service providers (VASPs) 

Because of the agreement, VASPs operating in Dubai who want to acquire a license from VARA also have the option to service the wider UAE by being registered by default with the SCA. 

Meanwhile, VARA has also tightened its rules on crypto marketing. On Sept. 26, the regulator said that firms promoting digital asset investments should add a prominent disclaimer to their material. 

The disclaimer must state that “virtual assets may lose their value in full or in part and are subject to extreme volatility.”

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