The United Arab Emirates continues to cement its position as a Middle East crypto hub after passing a law that will eliminate value-added tax on digital asset transfers.

The country’s Federal Tax Authority approved the move last week, with the changes set to go into effect on November 15, 2024. Interestingly, the tax adjustment for cryptocurrencies will be applied retroactively to transactions from January 1, 2018.

Cryptocurrency Conversions and Transfers to Get Retroactive VAT Exemption

Value-added tax in the UAE is typically applied to most goods and services at a flat rate of 5% — a significant amount for serious traders or institutional investors. Eliminating this fee on virtual asset transactions — including crypto-to-crypto conversions — would make using digital currencies in the region significantly cheaper.

Blockchain companies can claim back VAT paid on relevant transfers dating back to 2018, which will likely require companies to publish records of their transactions.

The news comes as part of a wider legislative overhaul of cryptocurrencies around the world, with the United Arab Emirates setting a new direction to better support modern Web3 infrastructure.

A significant step was taken in March 2022, when the country introduced a local Virtual Assets Regulatory Authority. It, along with the UAE’s main financial agency, the Securities and Commodities Authority (SCA), is responsible for overseeing cryptocurrency exchanges in the region.

The changes to virtual asset taxation in the UAE will provide significant incentives for local blockchain businesses, giving them more cash flow to implement innovative technologies and support their customers.

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