UAE to scrap value-added tax on crypto transactions, Binance responds
Earlier this week, the UAE announced changes to its tax policy, exempting certain crypto transactions from value added tax (VAT). This move eliminates the previous 5 percent VAT on crypto transfers and conversions. In an interview with Gadgets360, Binance’s head of regional markets, Vishal Sacheendran, called the decision an important step toward positioning the UAE as a global hub for Web3 talent and businesses. He predicts that the country will soon see a wave of Web3-related companies as a result of this tax exemption.
From November 15, the UAE will not charge VAT on crypto transactions. This move will be implemented retroactively for crypto transactions from January 1, 2018. This will require companies dealing with virtual assets to voluntarily release transaction information to reconcile historical returns accordingly. PwC explains.
“As we prepare for greater cryptocurrency adoption in 2024, this move will significantly lower the barrier to entry into the UAE for individuals and businesses looking to engage in virtual digital assets. We hope that similar initiatives will emerge in other markets,” Sacheendran told Gadgets360.
The UAE’s decision to change its tax policy and eliminate VAT on crypto transactions brings the digital asset industry on par with traditional financial services. By abolishing this tax, the UAE has effectively legitimized the crypto sector and integrated it into the country’s broader financial landscape without additional tax burden.
According to Jagdish Pandya, chairman of Web3-focused investment firm BlockOn Ventures, the UAE should brace for noticeable job growth coming from the Web3 sector.
“In this race of regulators, the UAE is the torchbearer of the world of Web3. Between 2020 and 2024, multiple free trade zones in the UAE have integrated regulated and license-supported ecosystems for businesses related to cryptocurrencies and Web3. The chances of getting training and employment in Web3 will undoubtedly increase in the Web3-friendly UAE. In the near future, the number of BTC ATMs, crypto payments for taxis, restaurants and luxury stores will increase in the UAE,” noted the Dubai-based Web3 investor.
In India, crypto profits are taxed at 30 percent, with each transaction subject to a TDS of 1 percent (tax deduction at source). Since these tax laws were introduced in April 2022, the Indian crypto community has repeatedly called on the government to review and reduce these rates.
Due to the high taxes, concerns have grown about the migration of Web3 talent to more crypto-friendly countries such as the UAE, which could hinder India’s potential to become an early leader in Web3 adoption. So far, the government has not responded to the Web3 community’s continued pleas for tax relief.
According to a recent Chainalysis report, despite dissatisfaction with high taxes, India has shown the most promise in crypto adoption for the second consecutive year in 2024.
The UAE, on the other hand, has not only overhauled its tax regime for crypto but also established the VARA regulatory framework to comprehensively govern the Web3 sector. As part of their tax changes, the UAE has also managed to establish a clear classification of what falls under the umbrella of virtual assets.
Explanation of the criteria, the official announcement document say that virtual assets are “a digital representation of value that can be digitally traded or converted and used for investment purposes, and does not include a digital representation of fiat currency or financial securities.”
