UAE Scraps Value Added Tax on Crypto Transactions, Binance Foresees Rapid Growth in Web3 Businesses

Starting November 15, the UAE will not charge VAT on crypto transactions.

Written by Radhika Parashar, Edited by Siddharth Suvarna | Updated: 8 October 2024 13:56 IST

UAE Scraps Value Added Tax on Crypto Transactions, Binance Foresees Rapid Growth in Web3 Businesses

Photo Credit: Pixabay/ Danor Aharon

Starting November 15, the UAE will not charge VAT on crypto transactions

Highlights

The UAE has VARA regulations to govern crypto
Multiple free trade zones in UAE are offering licences to crypto firms
The UAE is aiming at establishing itself as a Web3 hotspot

Earlier this week, the UAE announced changes to its tax policy, exempting certain crypto transactions from Value Added Tax (VAT). This move eliminates the previous 5 percent VAT on crypto transfers and conversions. In an interview with Gadgets360, Binance's Head of Regional Markets, Vishal Sacheendran, called the decision a significant step towards positioning the UAE as a global hub for Web3 talent and businesses. He predicts that the country will soon see a surge in Web3-related companies as a result of this tax exemption.

Starting November 15, the UAE will not charge VAT on crypto transactions. This move is being implemented retrospectively covering crypto transactions from as far back as January 1, 2018. This will require businesses dealing with virtual assets to voluntary disclose transaction information to align historic returns accordingly, PwC explained.

“As we prepare for increased crypto adoption in 2024, this move will significantly lower the entry barrier into the UAE for individuals and businesses looking to engage with virtual digital assets. We hope to see similar initiatives emerge in other markets,” Sacheendran told Gadgets360.

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The UAE's decision to amend its tax policies and eliminate VAT on crypto transactions aligns the digital assets industry with traditional financial services. By removing this tax, the UAE has effectively legitimised the crypto sector, integrating it into the country's broader financial landscape without additional tax burdens.

As per Jagdish Pandya, the chairperson of Web3-focussed investment firm BlockOn Ventures, the UAE should brace itself to see a noticeable growth in employment generation stemming from the Web3 sector.

“In this race of regulators, the UAE is torchbearer to the world of Web3. Between 2020 and 2024, multiple free trade zones in the UAE have incorporated regulated and license-backed ecosystems for businesses related to cryptocurrencies and Web3. Opportinities to obtain training and job in Web3 is bound to spike in Web3-friendly UAE. In the coming times, rise in the number of BTC ATMs, crypto payments for cabs, restaurants, and luxury shopping will pick pace in the UAE,” the Dubai-based Web3 investor noted.

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In India, crypto gains are taxed at 30 percent, with each transaction incurring a 1 percent TDS (Tax Deducted at Source). Since these tax laws were implemented in April 2022, the Indian crypto community has repeatedly called on the government to revise and lower these rates.

Due to the high taxes, concerns have grown about the migration of Web3 talent to more crypto-friendly countries like the UAE, which could hinder India's potential to become an early leader in Web3 adoption. So far, the government has not responded to the persistent pleas for tax relief from the Web3 community.

As per a recent Chainalysis report, despite the discontent around hefty taxes, India has shown the most promise in terms of crypto adoption for the second consecutive year in 2024.

The UAE, on the other hand, has not only revised its tax regime for crypto but has also established the VARA framework of regulations to comprehensively govern the Web3 sector. As part of its tax amendments, the UAE has also managed to spell out a clear classification of what falls under the umbrella of virtual assets.

Explaining the criteria, the official announcement document says that virtual assets are “digital representation of value that can be digitally traded or converted and can be used for investment purposes, and does not include digital representations of fiat currencies or financial securities.”

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Further reading: Cryptocurrency, UAE, Crypto Tax, Web3, Binance

Radhika Parashar

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Radhika Parashar is a senior correspondent for Gadgets 360. She has been reporting on tech and telecom for the last three years now and will be focussing on writing about all things crypto. Besides this, she is a major sitcom nerd and often replies in Chandler Bing and Michael Scott references. For tips or queries you could reach out to her at RadhikaP@ndtv.com. More