In an official communication, the UAE’s Federal Tax Authority (FTA) abolished value-added taxes (VAT) on crypto transactions, marking a significant milestone in supporting the country’s crypto adoption. The removal of VAT on crypto transactions in UAE sparked excitement among the crypto community that other countries will follow suit.
Even though it’s still unclear whether the other countries will replicate the Middle East country move the FTA confirmed that the new legislation will take effect on November 15. The financial regulators announced important reforms to the ‘Executive Regulation of Federal Decree- Law No: 8 on VAT.’
UAE Reduce VASPs Tax Burden
Under the new rule, UAE nationals will be exempted from incurring value-added taxes when engaging in crypto activities. The FTA clarified that the new tax reform would affect not only the retail customers but also the institutional clients.
However, the new rule mandates virtual assets service providers (VASPs) and fund managers to assess whether they qualify for the VAT exemption. Once the new legislation takes effect the FTA explained that the VASPs will be required to carefully examine their value-added taxes obligation and revise their past tax filings.
The new legislation defines virtual assets and conditions under which VAT will be exempted. This implies that if the new value-added taxes provision takes effect, the FTA might relieve the VASP tax burden on past transactions.
The financial regulators will allow the VASPs to file for voluntary disclosures to revise past tax returns accordingly. However, the FTA plans to make the new legislation clear to support compliance.
The removal of VAT on crypto activities encourages people from the Middle East to actively engage in crypto activities. Remarkably the new tax regime seeks to improve the attractiveness of the Arab crypto market to attract more investors.
Will Other Countries Follow UAE in Reducing Crypto Taxes?
Apart from supporting the Middle East crypto industry, the financial regulators envision that the new rule will bring innovation to the financial sector. For years the UAE boasts of thriving oil manufacturing but lately, the Arab country has invested in supporting the growth of the crypto industry.
In the past few months, the Arab country has closed a strategic partnership to support the development of blockchain and crypto technologies in the region. Also, the Middle East country has been working to provide a comprehensive regulatory framework for digital assets.
With the new tax regime, the market watchers expect other countries to support tax reduction for crypto activities. They argued that tax reduction will foster innovation in the digital sector and attract foreign investment.
How Will Tax Reduction Promote Crypto Adoption?
Besides making the UAE a crypto-friendly country, the new rule will help the Arab country tap into top-tier talents in crypto and blockchain technologies. The new legislation mirrors the amendment made by the government of Singapore to reduce tax burdens on VASPs.
Elsewhere, the market critics expect the US to follow in UAE’s footsteps and reduce taxes on crypto. Weeks before the US 2024 general election takes place, the community expects the implementation of crypto-friendly policies to make America a global crypto hub.
With expected policy shifts it’s important for the government to embrace emerging technologies to support financial innovation. For more updates on how regulatory shifts on digital assets support crypto adoption, follow TurkishNY Radio on Tumblr, Telegram, and LinkedIn.
