The UAE just gave crypto habibis another reason to come to Dubai – no VAT on crypto transactions. And the new rule will be applied retroactively from January 2018. So if you’ve coughed up that 5% tax, you could be due a nice little payday.
VAT was introduced in the UAE six years ago and has since been applied to most goods and services. But from 25 November, crypto transactions will be tax-free again, according to the Federal Tax Authority.
For small investors, this means lower costs when trading or converting crypto. For entrepreneurs, the UAE just became way more appealing than other crypto-friendly locations.
- The US, for instance, has taken big strides in recent years to bring crypto into the mainstream. But short-term capital gains on assets held for less than a year are taxed between 10% and 37%. Long-term gains are taxed at 0% to 20%, depending on overall income.
- In the UK, gains from crypto are subject to a 10% or 20% capital gains tax, depending on income. VAT is applied but only when crypto is used to pay for goods and services.
- In the EU, crypto exchanges are VAT-exempt but, again, the tax applies when crypto is used to pay for goods and services. Capital gains tax varies from one member country to another.
- In India, crypto profits are taxed at a flat 30%, with an additional 4% levy. This tax applies to all transactions, from trading to selling and purchasing goods using crypto.
With the latest move, the UAE joins the likes of Cayman Islands, Bermuda, Malta, Singapore and Switzerland, in imposing no VAT, capital gains tax or income tax on certain types of crypto transactions.
It was was ranked third in a recent study on crypto adoption by investment migration consultancy Henley & Partners.
If you’re an individual investor, this exemption might make UAE-based crypto exchanges and platforms more attractive due to potentially lower fees. And if you’re building a crypto-related business, this means fatter profits if you’re based in Dubai though, let’s be real, it’s in no way a ‘cheap’ place to be based. You’ll have to do your sums carefully.
