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UAE Crypto Mining – VAT Implications

On 14th January 2025, the Federal Tax Authority (FTA) has issued a public clarification, VATP039, providing important updates regarding the VAT treatment of cryptocurrency mining activities in the UAE.

Key Highlights

This Public Clarification clarifies the VAT treatment of cryptocurrency mining using the proof-of-work mechanism.

  1. Mining for Personal Account
    1. Cryptocurrency mining undertaken for one’s own account is not considered a taxable supply and falls outside the scope of VAT.
    2. Rewards received (e.g., mined tokens) are not treated as consideration for VAT purposes.
    3. Input VAT incurred on expenses related to mining for one’s own account (e.g., hardware, utilities) is not recoverable, as these expenses are not connected to taxable supplies.
  2. Mining for Another Person:
    1. If cryptocurrency mining is conducted on behalf of another person (e.g., providing computational power), it is considered a taxable supply of services.
    2. VAT is applicable at the standard rate (5%) unless conditions for zero-rating under Article 31 of the Executive Regulation are met (e.g., the recipient is a non-resident).
    3. Input VAT incurred for taxable mining activities on behalf of others may be recoverable, subject to supporting documentation like valid tax invoices.
  3. Reverse Charge Mechanism:
    1. UAE businesses receiving mining services from non-resident providers must apply the reverse charge mechanism to account for VAT.
  4. Supplier Registration Requirements:
    1. Non-resident person providing mining services to UAE resident business must register for VAT in the UAE and charge VAT, if UAE resident business is not registered for VAT.

MCA Comments

  • Businesses / persons engaged into cryptocurrency mining activities, need to evaluate correct VAT treatment of their transactions.
  • Proper documentation, such as contracts and invoices, would be critical to determine VAT applicability and input tax recoverability.

Copy of the VAT Public Clarification can be accessed:

VATP039 - Crypto Currency Mining

How MCA can Help

Our team is ready to support you in this process by:

  • Analysing the implications of cryptocurrency mining activities on your VAT obligations.
  • Evaluating your eligibility to recover input VAT for cryptocurrency mining-related expenses.
  • Ensuring your VAT returns reflects correct tax positions and filed on time.
  • Assisting non-resident cryptocurrency mining service providers with UAE VAT compliances.

Our expert guidance can help mitigate risks and ensure smooth compliance with the updated requirements.

Please feel free to contact us for any further clarification/impact assessment.

Contact Details

Email: mcatax@mcagulf.com
Telephone (Dubai UAE): +971 4 3319501
Mobile/WhatsApp: +971 50 5528079
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