The United Arab Emirates has announced the exemption of cryptocurrency transactions from value-added tax (VAT), an important development that aligns the crypto sector with traditional financial services. This regulatory change comes into effect on November 15 and is retroactive to transactions dating back to January 1, 2018.

This ruling means that all exchanges and transfers of cryptocurrency will no longer incur the 5% VAT, which was previously applicable. As noted by Ankita Dhawan, a senior associate at Métis Institute, this regulation effectively categorizes virtual assets alongside traditional financial services, which are often exempt from such taxes. This move is seen as a significant step towards legitimizing the cryptocurrency market in the UAE.

"The UAE has essentially classified virtual assets in the same bucket as traditional financial services – several of which are already exempt from VAT. This legitimizes VAs," said Ankita Dhawan.

For further reading, see the Arabic version of the update here and its English translation here.