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Changes to the UAE’s value added tax (VAT) regime are scheduled to come into effect on November 15, 2024, according to the Federal Tax Authority (FTA).
These updates affect several sectors, with investment fund management and virtual assets receiving key exemptions.
This amendment follows Cabinet Decision No. 100 of 2024, which aims to streamline VAT regulations, stimulate investment, and align the system with international standards. These changes are expected to benefit companies dealing with crypto assets and investment funds, further enhancing the UAE’s status as a global financial hub.
According to a recent note from audit firm PwC, “additional services such as investment fund management are exempt from VAT.” [and] Transfer ownership of virtual assets, including cryptocurrencies. ”
The memo also highlights that the conversion of virtual assets will also be exempted from VAT, with the last two exemptions applying retrospectively from January 1, 2018.
One of the key changes is the exemption from VAT on services provided by fund managers to licensed funds. This exemption applies to “management of the fund, investment management for or on behalf of the fund; [and] monitor and improve the performance of the fund,” PwC said.
The company also urges fund managers and the funds they provide to “analyze whether (and to what extent) their services qualify for VAT exemption and the impact on their VAT collection status.” asked to do so.
In the area of cryptocurrencies, transfers and conversions of virtual assets such as digital currencies are also exempt from VAT.
PwC advises companies dealing with crypto assets to “analyze the impact of exemptions on (retrospective) VAT positions, particularly with respect to recovery of input tax”, with some companies amending past returns. He pointed out that it may be necessary to submit voluntary disclosures for the purpose of
UAE emphasizes business friendliness
Younis Haji Al Khouri, Undersecretary of the Ministry of Finance, said these changes aim to increase clarity and ensure a smoother experience for businesses. “These amendments will minimize misunderstandings, simplify procedures and ultimately contribute to improving the quality of life for everyone,” he said.
Other notable changes include revised rules for the export of goods and services and clearer definitions of supply-related conditions. Charities and government bodies also benefit from VAT exemption on certain in-kind donations of up to AED 5 million.
While the investment and cryptocurrency sectors are expected to benefit the most, PwC advised companies across all industries to consider the proposed amendments carefully.
“Businesses should analyze the impact of the amendments on their VAT position,” the company said, underscoring the importance of understanding potential changes to VAT recovery.
These reforms are seen as a strategic step to balance revenue collection while strengthening the country’s investment climate.