Dubai, UAE – On January 14, 2025, the UAE’s Federal Tax Authority (FTA) introduced new rules clarifying how VAT applies to cryptocurrency mining. Unlike many other countries where the tax treatment of crypto remains unclear, these guidelines provide much-needed clarity, making the UAE an attractive hub for cryptocurrency and blockchain businesses. 

As cryptocurrency mining gains traction globally, the FTA’s clarification addresses key scenarios and obligations for individuals and businesses involved in this emerging sector. 

Mining for Personal Use Exempt from VAT 

According to the FTA, cryptocurrency mining conducted for personal use does not qualify as a taxable supply under VAT regulations. The reward received from mining, such as tokens from blockchain networks, is not considered a taxable consideration due to the absence of a direct link between the activity and the reward. 

This ruling offers relief to individuals engaged in mining for their own accounts, confirming that their activities fall outside the scope of VAT. 

Mining Services for Others Subject to VAT

In contrast, the FTA emphasized that mining performed on behalf of others in exchange for a fee is classified as a taxable supply of services. These transactions are subject to the standard VAT rate of 5%, unless specific conditions for zero-rating—such as services provided to non-residents—are met under Article 31 of the Executive Regulations. 

Input Tax Recovery Rules Outlined

The FTA also clarified rules around input tax recovery for mining activities: 

  • Personal Mining Activities: Input tax incurred on related expenses, including hardware, utilities, and rentals, is non-recoverable as these activities do not result in taxable supplies. 
  • Mining Services for Others: Businesses providing mining services to others may recover input tax to the extent that expenses are directly linked to taxable supplies, provided proper documentation is maintained. 

Cross-Border Mining Services and VAT

For UAE businesses receiving mining services from non-resident suppliers, VAT must be accounted for using the reverse charge mechanism. If services are supplied to non-registered customers in the UAE, the non-resident supplier may need to register for VAT in the UAE irrespective of threshold limit. 

Implications for the Cryptocurrency Sector

The FTA’s clarification marks an important step in providing tax certainty for cryptocurrency miners and businesses. It underscores the need for compliance with VAT obligations and the importance of maintaining accurate records to support input tax claims. 

Experts encourage businesses to review their operations carefully and seek professional tax advice to ensure compliance with these guidelines. Accurate record-keeping and an understanding of the rules will be key to minimizing risks and optimizing tax recoveries. 

Stay Updated 
As the cryptocurrency sector continues to evolve, the FTA’s guidelines serve as a critical framework for navigating tax implications in the UAE. 

What’s next for VAT in the cryptocurrency industry? Share your thoughts in the comments.