UAE Clarifies VAT Rules for Cryptocurrency Mining
The Federal Tax Authority (FTA) of the UAE has confirmed that cryptocurrency mining conducted for personal accounts will not be subject to Value-Added Tax (VAT). This announcement brings clarity to the tax treatment of individual mining activities.
However, the FTA stated that mining cryptocurrency for others—where computational power is supplied as a service—is classified as a taxable activity and subject to a five per cent VAT. This clarification was outlined in the authority’s latest public document, VATP039.
Nirav Rajput, a partner at Aurifer, highlighted that the UAE is taking a proactive approach compared to other jurisdictions with less-defined VAT regulations for virtual assets. “Personal cryptocurrency mining is exempt from UAE VAT as the computational work performed by an individual is not tied to a guaranteed reward or a specific recipient,” he explained.
Despite this clarification, Rajput noted that ambiguity persists regarding whether individual mining qualifies as a business activity subject to corporate income tax (CIT) or if it falls under personal investment income, which is not classified as a business activity.
As cryptocurrencies continue to gain popularity in the UAE, the taxation of cryptocurrency mining has become a significant topic for residents.
The UAE’s growing appeal to crypto investors is evident in the Henley and Partners’ Crypto Adoption Index 2024, which ranks the country third globally for cryptocurrency adoption. The report attributes this position to strong government support, low taxes, and a highly digitalised, affluent population.
Additionally, in December 2024, AE Coin secured licensing from the Central Bank of the UAE (CBUAE) to operate. The initiative aims to deliver an innovative, low-cost, secure, and efficient payment solution, promising to redefine the digital economy.
Taxation for Mining on Behalf of Others
For those mining cryptocurrencies on behalf of others for a fee, the activity is treated as a taxable service. Rajput explained that miners in such cases receive fixed compensation from identifiable recipients.
“Services provided to recipients in the UAE would be taxed at the standard five per cent VAT rate. However, if services are rendered to non-resident recipients, they may qualify for zero-rating, provided they meet the conditions specified in Article 31 of the UAE VAT Executive Regulations,” he added.
In such scenarios, miners can also recover input VAT incurred during operations, such as VAT on utilities, internet services, and rental expenses, as long as these align with the input VAT recovery rules.
From a Corporate Income Tax perspective, earnings from mining services provided to others are subject to taxation.
