Is VAT charged on crypto assets?

Article 42 – Tax Treatment of Financial Services 27 1. For the purposes of this Article: 25 Article amended as per Cabinet Decision No. 100 of 2024. 26 Clause amended as per Cabinet Decision No. 149 of 2026. 27 Article amended as per Cabinet Decision No. 100 of 2024. Cabinet Decision No. 52 of 2017 and its amendments – As published by the Ministry of Finance 32 a. The phrase “debt security” means any interest in or right to be paid money that is, or is to be, owing by any Person, or any option to acquire any such interest or right. b. The phrase “equity security” means any interest in or right to a share in the capital of a legal person, or any option to acquire any such interest or right. c. The phrase “life insurance contract” means a contract lawfully entered into to the extent that it places a sum or sums at risk upon the contingency of the termination or continuance of human life, marriage, similar relationships permitted under applicable law, or the birth of a child. d. The phrase “Islamic financial arrangement” means a written contract which relates to a supply of financing in accordance with the principles of Shariah and relevant laws. 2. Financial Services are Services connected to dealings in money (or its equivalent) and the provision of credit and include for instance the following: a. The exchange of currency, whether effected by the exchange of bank notes or coin, by crediting or debiting accounts, or the like. b. The issue, payment, collection, or transfer of ownership of a cheque or letter of credit. c. The issue, allotment, drawing, acceptance, endorsement, or transfer of ownership of a debt security. d. The provision of any loan, advance or credit. e. The renewal or variation of a debt security, equity security, or credit contract. f. The provision, taking, variation, or release of a guarantee, indemnity, security, or bond in respect of the performance of obligations under a cheque, credit, equity security, debt security, or in respect of the activities specified in paragraphs (b) to (e) of this Clause. g. The operation of any current, deposit or savings account. h. The provision or transfer of ownership of financial instruments such as derivatives, options, swaps, credit default swaps, and futures. i. The provision or transfer of ownership of a life insurance contract or the provision of re-insurance in respect of any such contract. j. The management of investment funds, which means “services provided by the fund manager independently for a consideration, to funds licensed by a competent authority in the State, including but not limited to, management of the fund’s operations, management of investments for or on behalf of the fund, monitoring and improvement of the fund’s performance”. k. The transfer of ownership of Virtual Assets, including virtual currencies. Cabinet Decision No. 52 of 2017 and its amendments – As published by the Ministry of Finance 33 l. The conversion of Virtual Assets. m. Keeping and managing Virtual Assets and enabling control thereof. n. Agreeing to do or arranging any of the activities specified in paragraphs (a) to (m) of this Clause, other than advising thereon. 3. The following financial services shall be exempted: a. Activities under Clause 2 of this Article where they are not conducted in return for an explicit fee, discount, commission, and rebate or similar. b. The issue, allotment, or transfer of ownership of an equity security or a debt security. c. The provision or transfer of ownership of a life insurance contract or the provision of re-insurance in respect of any such contract. d. Fund management services described in paragraph (j) of Clause 2 of this Article. e. Services specified in paragraphs (k) and (l) of Clause 2 of this Article, including services supplied on or after 1 January 2018. 4. Activities under Clause 2 of this Article shall be subject to tax where the consideration payable in respect of a supply of Services is an explicit fee, commission, discount, and rebate or similar. 5. Islamic finance products, being financial products under contract which are certified as Islamic Shariah compliant, which simulate the intention and achieve effectively the same result as a non-Shariah compliant financial product, will be treated in a similar manner as the equivalent non-Shariah financial product for the purpose of applying exemption from Tax. 6. Any supply made under an Islamic financial arrangement shall be treated in such a way as to give an outcome for the purposes of the Decree-Law and the decisions issued by the Authority, comparable to that which would be the case for their nonIslamic counterparts. 7. Where Article 31 of this Decision applies in respect of a supply of financial services, this supply should be treated as zero-rated.

VATP039 VAT Public Clarification توضيح عام بشأن ضريبة القيمة المضافة Crypto currency mining تعدين العمالت الرقمية الموضوع Issue With the rising popularity of cryptocurrencies, the أصبحت مسألة المعاملة،مع تزايد االهتمام بالعمالت الرقمية question of tax treatment of crypto currency .الضريبية لتعدين العمالت الرقمية ذات أهمية متزايدة mining has become increasingly relevant. In a case of proof of work, a person can mine crypto من الممكن أن يقوم الشخص بتعدين،"في حال "إثبات العمل currency for his own account, or for someone’s أو لحساب شخص آخر من،عملة رقمية لحسابه الخاص account by providing access to excess خالل توفير الوصول إلى قدرة حوسبية فائقة أو مزارع .بيانات computational power or data farms. For purposes of this public clarification, “crypto ً تُعد "العمالت الرقمية" شكال،ألغراض هذا التوضيح العام currencies” are a form of virtual assets.1 Examples تتضمن أمثلة العمالت1.من أشكال األصول االفتراضية of crypto currencies include Bitcoin, Ethereum الرقمية البيتكوين واليثريوم (الكالسيكي) والعمالت (Classic), and other currencies that are based on ."األخرى التي تستند إلى "إثبات العمل proof of work. This Public Clarification clarifies the VAT treatment يهدف هذا التوضيح العام إلى بيان معاملة ضريبة القيمة of crypto currency mining using the proof-of-work المضافة لمعامالت تعدين العمالت الرقمية باستخدام آلية .إثبات العمل mechanism. ملخص Summary Crypto currency mining by a person2 for his own بتعدين العمالت الرقمية لحسابه الخاص2ال يُعد قيام الشخص account is not a taxable supply3 and falls outside بل يقع خارج نطاق ضريبة القيمة3توريدا ً خاضعا ً للضريبة .المضافة the scope of VAT. Mining crypto currency on behalf of another أي،يعتبر تعدين العمالت الرقمية نيابةَ عن شخص آخر person, i.e. supplying computational power, is . بمثابة توريد لخدمات خاضع للضريبة،توريد قدرة حوسبية considered to be a taxable supply of services. Input tax incurred on expenses by a person mining وال تكون ضريبة المدخالت التي يتكبدها شخص على نفقات 1/9

3. Keeping and managing virtual assets and enabling حفظ وإدارة األصول االفتراضية وتمكين السيطرة.3 control thereof (e.g. managing crypto wallets). تخضع هذه.)عليها (مثل إدارة المحافظ الرقمية This financial service is taxable if supplied in the الخدمة المالية للضريبة إذا ت ّم توريدها في الدولة UAE for an explicit fee, commission or similar .مقابل رسوم صريحة أو عمولة أو ما شابه ذلك charge. The term “virtual currencies” is used to refer to يُستخدم مصطلح "العمالت االفتراضية" لإلشارة إلى types of digital currencies other than the digital أنواع العمالت الرقمية بخالف التمثيل الرقمي representation of fiat currency (e.g. AED). Crypto العمالت.)للعمالت الورقية (مثل الدرهم اإلماراتي currencies are a subset of virtual currencies. الرقمية هي مجموعة فرعية من العمالت .االفتراضية From a VAT perspective, crypto currencies are ال تعتبر العمالت،من منظور ضريبة القيمة المضافة .الرقمية أمواالً وال تتم معاملتها على ذلك األساس neither regarded nor treated as money. It must be noted that that the mere listing of a تجدر اإلشارة إلى أن مجرد إدراج خدمة مالية في البند financial service in Article 42(2) of the Executive ) من الالئحة التنفيذية ال يكفي إلعفاء42( ) من المادة2( Regulation is not sufficient to exempt such service هذه الخدمة من ضريبة القيمة المضافة حيث يتمّ تحديد from VAT as the exemptions are determined under ) من الالئحة42( ) من المادة3( اإلعفاءات بموجب البند .التنفيذية Article 42(3) of the Executive Regulation. Tax on supplies of more than one component – )46( فرض الضريبة على توريد أكثر من مكوّ ن – المادة Article 46 A new paragraph was added to Article 46(1) of the ) من46( ) من المادة1( أُضيفت فقرة جديدة إلى البند Executive Regulation to clarify that, where a single الالئحة التنفيذية لتوضيح أنه في حال إجراء توريد واحد composite supply is made which does not contain a فإن المعاملة،مركب ال يحتوي على مكوّ ن رئيسي principal component, the tax treatment is based on .الضريبية تعتمد على طبيعة التوريد ككل the general nature of the supply as a whole. Input tax recovery in respect of exempt supplies – – استرداد ضريبة المدخالت المتعلقة بالتوريدات المُعفاة )52( المادة Article 52 Article 52(2) of the Executive Regulation was ) من الالئحة التنفيذية52( ) من المادة2( ت ّم تعديل البند amended to align with the previous amendment to ) من31( ) من المادة2( ليتماشى مع التعديل السابق للبند 26/37