UAE: Will VAT apply to cryptocurrency mining?
Cryptocurrency mining in the private wallets of citizens is exempt from UAE value-added tax (VAT), the Federal Tax Authority (FTA) said Tuesday.
But mining cryptocurrency for someone else (i.e. bringing computer processing power), is a taxed service supply and 5 per cent VAT, the authority explained in a recent public announcement, VATP039.
Nirav Rajput, partner at Aurifer, added: In contrast to most reputable tax authorities where VAT on virtual assets is ambiguous, the FTA has clarified the position of the UAE as a favorite for miners.
"Mining cryptocurrencies on a personal account is exempt from UAE VAT law. Because the computing effort of a person’s network is not attributed to any fixed reward (i.e., cryptocurrency) or an individual receiver," he added.
The VAT treatment for individual miners is now clear but there is still confusion as to whether cryptocurrency mining done by an individual for their own personal account is a business activity and therefore subject to CIT, or whether it is personal investment income and thus not part of the business activities.
With cryptocurrency being more common in the UAE, the issue of taxation on cryptocurrency mining is also more relevant for residents.
Henley and Partners’ Crypto Adoption Index 2024 has identified the UAE as a number one country for crypto investors and is third in the adoption list with a large percentage of the population holding cryptocurrencies, strong government support, low tax regime and a highly digitalised and wealthy population.
AE Coin, which received the CBUAE’s (Central Bank of the UAE) licence to operate in December 2024, is an instant, secure, stable, innovative, cheap and reliable payment system that will redefine the digital economy in the near future.
Mining for others
On the other hand, if one mines cryptocurrencies on behalf of someone else for a fee, Rajput said, that’s a taxable supply. Here the miner gets a set amount from a named sender.
"This kind of service would normally be billed on the basic VAT rate of five per cent if it is offered to a recipient in the UAE. But if such services are delivered to a non-resident end-user, they will be zero-rated, if they meet the thresholds mentioned in Article 31 of the UAE VAT Executive Regulations. The miner would be able to recover input VAT too in this context, while doing the computation, for example, VAT on utilities, rent, internet, etc, if he/she satisfied the normal requirements for input VAT recovery," he said.
He said for the purpose of Corporate Income Tax, fees for mining cryptocurrency for someone else is taxed.
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