UAE Tax authority to levy VAT from Crypto mining service providers

The Federal Tax Authority (FTA) of the United Arab Emirates (UAE) issued a clarification regarding VAT (Value Added Tax) for those dealing in cryptocurrency mining.

As per the clarification, individuals who are crypto mining for themselves will not incur a VAT tax; however, if they are mining for others offering it as a service, they will need to pay VAT. The UAE VAT tax rate is 5%.

The Federal Tax Authority define Cryptocurrency Mining as “the process where specialized computers, also known as mining rigs, validate blockchain transactions for a specific cryptocurrency, for which a reward may be received for the contribution of computational power.”

Input tax is non-recoverable for Individual crypto miners

When it comes to Input Tax Recovery Guidelines, the FTA has clarified the recovery of input tax related to mining activities, both for personal and third-party mining. In terms of personal crypto mining, input tax on expenses like hardware purchases, real estate rental, or utility bills is non-recoverable as these costs are not tied to taxable supplies.

Input tax is a tax that is added to goods and services that a business buys to make its own goods or provide its own services:

As for Third-Party crypto mining services, registered miners providing services to others may recover input tax to the extent that it is incurred for taxable activities. Proper documentation, such as tax invoices, is required for this recovery.

Personal crypto mining is exempted from VAT

In terms of VAT, mining cryptocurrency by a person for their own account is not considered a taxable supply and, therefore, falls outside the scope of VAT.

The Federal Tax Authority noted, “Cryptocurrency mining by a person for his own account is not a taxable supply and falls outside the scope of VAT. Mining cryptocurrency on behalf of another person, i.e. supplying computational power, is considered to be a taxable supply of services. This contribution involves validating blockchain transactions, and the person may only be rewarded if he is the first to successfully solve the cryptographic equation.”

The Federal Tax Authority also stated, “ A person mining cryptocurrency on behalf of another person for a fee is considered to make a supply of services. As there is an identifiable recipient for the activity, and the person performing the mining on another person’s behalf receives a consideration from his customer, the mining activities performed constitute a taxable supply of services.”

However, the supply may be zero-rated if it is made to a non-resident and all the requirements for zero-rating under Article 31 of Cabinet Decision No. 52 of 2017 on the Executive Regulation of Federal Decree-Law No. (8) of 2017 on Value-Added Tax (VAT).

Moreover, where a UAE business receives mining services from a non-resident person, such supply would be subject to VAT.

Crypto transactions are not subject to VAT

In October 2024, the UAE Federal Tax Authority (FTA) published an amended version of the Executive Regulation of Federal Decree-Law No. 8 2017 on value-added tax, which exempts virtual assets and investment fund management.

These amendments aimed to enhance clarity, provide further details on key provisions and procedures, and align with earlier changes in the Decree-Law and other relevant tax legislation.

When it comes to financial services, the decree noted that the management of investment funds and the transfer and ownership of virtual assets, including cryptocurrencies, as well as the conversion of virtual assets, will be exempt from value-added taxation. The exceptions on conversion of virtual assets and transfer and ownership of virtual assets are treated as effective from 1 January 2018.

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