In January 2025, the United Arab Emirates (UAE) Federal Tax Authority (FTA) issued a public clarification on the Value Added Tax (VAT) treatment of cryptocurrency mining activities. This guidance delineates the VAT implications for individuals and businesses engaged in mining digital currencies within the UAE.
1. VAT Treatment Based on Mining Activity
The FTA’s clarification distinguishes between two primary scenarios in cryptocurrency mining:
- Mining for Personal Account: When an individual or entity mines cryptocurrency solely for personal gain, without providing services to others, this activity is not considered a taxable supply. Consequently, it falls outside the scope of VAT.
- Mining on Behalf of Others: If mining services are rendered to another party in exchange for payment, this constitutes a taxable supply of services. The applicable VAT rate depends on the recipient’s location:
- UAE Resident: Standard 5% VAT rate applies.
- Non-UAE Resident: The supply may qualify for zero-rating, subject to specific conditions outlined by the FTA.
2. Input VAT Recovery
The eligibility to recover input VAT hinges on the nature of the mining activity:
- Personal Mining Activities: Individuals or entities mining for their own account cannot recover input VAT on related expenses, as these costs are not incurred to make a taxable supply.
- Commercial Mining Services: VAT-registered businesses providing mining services to others can recover input VAT on expenses, provided these costs are directly associated with taxable supplies. Proper documentation, such as valid tax invoices, is essential for claiming input VAT credits.
3. Reverse Charge Mechanism
For UAE businesses procuring mining services from non-resident suppliers, the reverse charge mechanism applies. This means the UAE recipient must account for the VAT as both the supplier and the recipient, ensuring compliance with local tax regulations.
4. Summary of VAT Implications
The table below encapsulates the VAT treatment for various cryptocurrency mining scenarios:
| Mining Activity | VAT Treatment | Input VAT Recovery |
| Mining for personal account | Not a taxable supply; outside the scope of VAT | Input VAT on related expenses is non-recoverable |
| Mining on behalf of UAE resident | Taxable supply at 5% VAT rate | Input VAT on related expenses is recoverable, subject to standard conditions |
| Mining on behalf of non-UAE resident | Potentially zero-rated supply, subject to FTA conditions | Input VAT on related expenses is recoverable, subject to standard conditions |
| Receiving mining services from non-resident supplier | UAE recipient must apply reverse charge mechanism; accounts for VAT as both supplier and recipient | Input VAT on related expenses is recoverable, subject to standard conditions and proper documentation |
These clarifications by the UAE FTA provide essential guidance for individuals and businesses involved in cryptocurrency mining, ensuring accurate VAT compliance and understanding of tax obligations within the UAE.
For information on “UAE FTA’s VAT Clarifications”, contact finnection via email at info@finnection.ae or call us at our toll free number +971 800 0120070
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