VATP039: Public Clarification on Crypto Currency Mining

VATP039: Public Clarification on Crypto Currency Mining

by | Mar 15, 2025

The Federal Tax Authority has released a Public Clarification (VAT P039) which clarifies aspects of VAT applicability on crypto currency mining services

Recently, the VAT Executive Regulations had seen an update which included the definition and VAT applicability of “Virtual Assets”. Based on such update, the transfer of ownership of virtual assets, including virtual currencies and conversion of virtual assets are considered as “Financial Services” and are exempt services under UAE VAT

The Public Clarification released by the FTA relates to the mining services provided for crypto currencies which are a form of virtual assets

Based on the combined applicability of Public Clarification and the updates in Executive regulations, some of the key aspects of crypto mining services are summarized for you reference:

Description Legislative Provision/Implication
Crypto currencies- Definition
  • Crypto currencies are a form of virtual assets and examples of crypto currencies include Bitcoin, Ethereum (Classic), and other currencies that are based on proof of work
Mining of Crypto Currency
  • Mining of crypto currency is the process where specialised computers (mining rigs), validate blockchain transactions for a specific crypto currency, for which a reward may be received for the contribution of computational power
  • A person can mine crypto currency for himself or contract with another person to mine on their behalf
  • Further, by implication, the mining of crypto currency is not considered as a “financial service” and thus the normal rules for VAT applicability will apply
Mining crypto for a person’s own account
  • Crypto currency mining by a person for his own account (i.e., not for any identifiable recipient) is not a taxable supply and shall be considered outside the scope of VAT
  • In such a scenario, no input tax credit would be available on the expenses incurred during and for the mining process
Mining crypto on behalf of another person
  • Supply of computational power, is considered to be a taxable supply of services subject to VAT at 5%
  • In case the mining services are provided to a non-resident, the same would be a zero-rated supply (subject to satisfaction of zero-rating export of service conditions)
  • In such a scenario, the person would be entitled to avail the input tax credit of the business expenses
Supply of Mining services by an overseas vendor
  • Where a UAE business (registered for VAT) receives mining services from a non-resident person such supply would be subject to VAT under reverse charge mechanism. Further, the input VAT on such RCM shall reviewed and claimed by the UAE business as per the general provisions of the Law
  • However, if the UAE customer is not a taxable person, the non-resident supplier is required to register for VAT in the UAE and charge VAT on the services provided

Below is a summary of the VAT implication for specific activities:

S.No. Transactions Taxability

Availability of Input tax credit

(for both local and overseas suppliers)
1
  • The transfer of ownership of virtual assets, including virtual currencies
  • The conversion of virtual assets
  • Keeping and managing virtual assets and enabling control thereof
  • If provided to a UAE customer – Exempt from VAT
  • No input tax credit available
  • RCM liability on import of services to be paid in cash (no input credit available on RCM)
  • If provided to an overseas customer outside the UAE – Zero-rated (export of services)
  • Full input tax credit available
2
  • Mining of crypto currency for a fee for an identifiable recipient
  • If provided to a UAE customer – subject to 5% VAT
  • Full input tax credit available
  • If provided to an overseas customer outside the UAE – Zero-rated (export of services)
  • Full input tax credit available
3
  • Mining of crypto currency for his own account, contributing computational power to the network and not to any identifiable recipient
  • Not a supply and outside the purview of VAT
  • No input tax credit available
  • RCM liability on import of services to be paid in cash (no input credit available on RCM)

With the increase in the number of crypto traders all around the world and also the UAE, the update provides significant clarity to the respective stakeholders to ensure proper compliance and also understand the costs of undertaking such operations

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