The United Arab Emirates have announced a digital asset tax exemption that marks a landmark change in the international cryptocurrency outlook. This decision, which excludes crypto transactions from value added tax (VAT), will reshape the UAE’s place in the world of digital finance and blockchain technology.
However, the UAE’s approach is progressive and business friendly as countries across the world grapple with how to regulate and tax cryptocurrencies.
What’s important about this is that it’s not just a local policy change, but could be a seismic move for the global crypto industry that could in turn see blockchain businesses migrate to the Middle East.
UAE Announces Groundbreaking Crypto Tax Exemption
The United Arab Emirates (UAE) has taken a big step forward in the cryptocurrency space as it exempts digital asset transfers and conversions from VAT. The State announced the news on October 2, claiming it amounted to a major departure in its approach toward virtual assets and blockchain technology.
According to business consultancy PwC, new amendments to the UAE’s VAT regulations will be applied from the beginning of 2018, retrospectively. According to our sources, this change will only mean that the UAE will continue to grow as an emerging global center of cryptocurrency and blockchain technology, with Dubai leading the way.
It is an attractive industry where the UAE’s progressive regulatory framework and supportive government policies have been drawing crypto firms from all over the world. These days, many companies, especially some from countries with stricter rules like India, are considering relocating to Dubai. The stark contrast between the UAE’s welcoming stance on digital assets around other countries is resulting in this trend.
If more companies come to the region, cryptocurrencies and blockchain technology may further take shape and grow in the United Arab Emirates because of the strategic geographic location of the country and its business friendly environment. Not only is crypto given a pass on VAT, but this leaves additional services such as managing investment funds on the table to attract further investment in financial innovation as destinations to do business.
Regulatory Updates and Compliance Measures
Additionally, regulators in the UAE have recently been updating and streamlining their rules for virtual assets, outside of VAT exemptions. Mutual supervision of ‘virtual asset service providers’ (VASPs), in the shape of Dubai’s Virtual Asset Regulatory Authority (VARA) and the UAE’s federal financial agency, the Securities And Commodities Authority (SCA), was agreed on September 9.
This means VASPs registered by default with the SCA can also lend some credence to operations in Dubai that would like to apply for a license with VARA, which would also entitle them by default to offer services in the wider UAE.
VARA has also toughened its rules on crypto marketing. Meanwhile, on Saturday, September 26, the regulator said firms touting for digital asset investments needed to place a prominent disclaimer on their material. It must declare that “virtual assets may be completely lost or partly lost, as well as highly volatile.”
By issuing these regulatory updates, the UAE is showing that it is willing to build in a measured way a balanced environment that encourages innovation, while at the same time ensuring that the requirements are met. In this case, the combination of tax exemptions with clear regulatory guidelines is likely to attract more blockchain and crypto businesses to the region and change the overall picture of the digital finance industry in the world.