The Federal Tax Authority (FTA) has clarified that cryptocurrency mining for personal accounts will not be subject to the UAE’s value-added tax (VAT). This announcement was made on Tuesday, addressing the growing interest in cryptocurrencies among residents. However, the FTA specified that if an individual mines cryptocurrency on behalf of someone else, this service will be considered taxable and subject to a five percent VAT.

As reported by Khaleej Times, Nirav Rajput, a partner at Aurifer, commented on the FTA’s clarification, noting that, unlike many established tax jurisdictions where VAT rules for virtual assets can be ambiguous, the UAE is reinforcing its position as an attractive destination for miners. He explained that mining on a personal basis is exempt from VAT because the computational work does not link to a fixed reward or a specific recipient.

Despite the clarification regarding VAT, Rajput highlighted ongoing uncertainty about whether individual mining constitutes a business activity that would be subject to corporate income tax (CIT). This uncertainty revolves around whether cryptocurrency mining is classified as personal investment income or a business activity under current regulations.

The clarity on tax treatment comes as the UAE continues to emerge as a leading hub for cryptocurrency investment. According to the Henley and Partners’ Crypto Adoption Index 2024, the UAE ranks third globally in cryptocurrency adoption, with a significant portion of the population owning digital assets. This trend is supported by strong government backing, a favorable tax environment, and a highly digitalized, affluent population.

In December 2024, AE Coin received licensing from the Central Bank of the UAE (CBUAE) to operate, promising innovative and efficient payment solutions that aim to transform the digital economy. Rajput further emphasized that mining cryptocurrencies for a fee on behalf of others is a taxable supply, which typically incurs the standard five percent VAT if provided to recipients within the UAE. If the services are offered to a non-resident, they can be zero-rated under specific conditions outlined in Article 31 of the UAE VAT Executive Regulations.

From a corporate income tax perspective, Rajput stated that fees earned from cryptocurrency mining for another person are taxable. This clarification is essential for individuals and businesses involved in the growing field of cryptocurrency in the UAE.