UAE Crypto Mining – VAT Implications

On 14th January 2025, the Federal Tax Authority (FTA) issued a public clarification, VATP039, providing important updates regarding the VAT treatment of cryptocurrency mining activities in the UAE.

Key Highlights

This Public Clarification clarifies the VAT treatment of cryptocurrency mining using the proof-of-work mechanism.

1. Mining for Personal Account

• Cryptocurrency mining undertaken for one’s account is not considered a taxable supply and falls outside the scope of VAT.
• Rewards received (e.g., mined tokens) are not treated as consideration for VAT purposes.
• Input VAT incurred on expenses related to mining for one’s account (e.g., hardware, utilities) is not recoverable, as these expenses are not connected to taxable supplies.

2.Mining for Another Person:

• If cryptocurrency mining is conducted on behalf of another person (e.g., providing computational power), it is considered a taxable supply of services.
• VAT is applicable at the standard rate (5%) unless conditions for zero-rating under Article 31 of the Executive Regulation are met (e.g., the recipient is a non-resident).
• Input VAT incurred for taxable mining activities on behalf of others may be recoverable, subject to supporting documentation like valid tax invoices.

3.Reverse Charge Mechanism:

• UAE businesses receiving mining services from non-resident providers must apply the reverse charge mechanism to account for VAT.
• Supplier Registration Requirements:
• Non-resident persons providing mining services to UAE resident businesses must register for VAT in the UAE and charge VAT if a UAE resident business is not registered for VAT.