Is Cryptocurrency Mining in the UAE Taxable? Here’s What You Need to Know

The Federal Tax Authority (FTA) has provided a crucial update on the value-added tax (VAT) treatment of cryptocurrency mining in the UAE.

According to the clarification issued on Tuesday, mining cryptocurrency for personal accounts will not be subject to VAT. However, mining on behalf of another person, essentially supplying computational power for a fee, qualifies as a taxable service and is subject to the standard VAT rate of 5%.

Nirav Rajput, a partner at Aurifer, explained that the UAE’s approach to VAT on virtual assets distinguishes it from other jurisdictions with unclear tax rules. He stated,

“Mining cryptocurrencies for personal accounts is not subject to VAT because there is no direct link between the computational work and a fixed reward or recipient.”

Despite this clarification for individual miners, Rajput pointed out lingering uncertainty regarding whether personal account mining could be considered a business activity subject to corporate income tax (CIT) or if it qualifies as personal investment income, which is exempt.

The UAE has become a key hub for cryptocurrency investors, ranking third globally in adoption, according to Henley and Partners’ Crypto Adoption Index 2024. This growing popularity is supported by government backing, a low-tax environment, and a tech-savvy population.

For miners working on behalf of others, however, the situation is different. Mining services for a fee are subject to VAT, but if provided to non-residents, these services may be zero-rated under certain conditions. Additionally, miners can recover input VAT on related costs, such as utilities and internet services, provided they meet the usual recovery criteria.

News Source: Khaleej Times