The Federal Tax Authority (FTA) has provided guidance on the VAT treatment of cryptocurrency mining, particularly activities using the Proof-of-Work mechanism. This clarification aims to outline how VAT applies to mining activities in different scenarios.
Key Points
- Mining for Personal Use
- Cryptocurrency mining conducted for an individual’s own account is not considered a taxable supply and falls outside the scope of VAT.
- As a result, any expenses incurred (such as electricity and hardware purchases) are not eligible for VAT recovery.
- Mining as a Service
- If a person or business mines on behalf of another party (for example, by providing computational power), this is considered a taxable supply of services.
- VAT must be applied at the standard rate on the service provided.
- Input VAT on related expenses may be recovered if incurred for making taxable supplies.
- VAT on Mining Services from Foreign Suppliers
- If a UAE-registered business receives mining services from a non-resident provider, it must account for VAT under the reverse charge mechanism.
- If the UAE business is not VAT-registered, the foreign supplier must register for VAT in the UAE and charge VAT on the services provided.
Implications for Businesses and Individuals
- Individuals mining for personal use are not subject to VAT and cannot recover related input VAT.
- Entities providing mining services must ensure they comply with VAT regulations, including charging VAT and recovering input VAT where applicable.
- UAE businesses using foreign mining services must comply with VAT obligations under the reverse charge mechanism or ensure the foreign supplier is registered.
This clarification aligns with Federal Decree-Law No. 8 of 2017 on VAT and its amendments. It does not modify existing laws but clarifies their application to cryptocurrency mining activities.
Source: VATP039 – VAT Public Clarification – Crypto Currency Mining
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