What are the Taxes for Cryptocurrency in Dubai?

One might wonder about the tax obligations for cryptocurrencies in Dubai considering the fact that cryptocurrency earnings are taxed throughout the world. Given that the UAE is fast emerging as a crypto hub, it is important to know the tax status of cryptocurrencies in Dubai. The cryptocurrency market has seen a global rise in recent years, and the UAE has left no stone unturned to innovate the financial sector and become a prime hub for cryptocurrency and blockchain technologies. Through this article, we will explore the subject of taxation for cryptocurrencies in Dubai.

Taxes for Cryptocurrency Around the World

Before we delve into the specifics of crypto taxation in Dubai, it is necessary to know how cryptocurrencies are taxed around the globe. Globally, the taxation for cryptocurrencies varies from one country to another and largely depends on the way the jurisdiction sees the digital currency. Cryptocurrency is treated like stocks when it comes to taxation in many countries. Numerous countries have imposed capital gains taxes and income taxes on earnings from cryptocurrencies. The profits made from transactions like selling, swapping, or disposing of your crypto attract capital gains taxes in many jurisdictions around the world. Also, income tax is applicable to the rewards obtained from stalking and mining.

As an example, the regulations in the USA state that cryptocurrencies be treated like any other property. It is mandatory to report trades and maintain records.

Below are the transactions that are treated as ‘taxable as capital gains’ and ‘taxable as income’ in the USA.

Taxable as Capital Gains

1. Selling crypto
2. Conversion of crypto
3. Crypto spends for purchases

Taxable as Income

1. Salaries in crypto
2. Crypto mining
3. Received payments in crypto

Applicable Taxes for Cryptocurrency in Dubai

VAT

Value Added Tax (VAT) in the UAE is applicable on the sale of most goods and services here. Talking about VAT applicability for cryptocurrencies, the purchase and sale of cryptocurrencies as an investment may not usually be subject to VAT. However, utilizing cryptocurrencies for exchanging goods and services could attract VAT.

Corporate Tax

Corporate tax in the UAE is applicable at a rate of 9% for businesses with a taxable income of over AED 375,000. Anyone looking to set up a cryptocurrency business in Dubai or elsewhere in the UAE must bear in mind that regardless of whether the business will have to pay tax or not, registration and filing returns for corporate tax is a must. Moreover, the corporate tax laws in the UAE mandate the maintenance of proper accounting records for businesses. If you are keen to set up a crypto-based business here in Dubai, you may consider setting up in a Dubai free zone. With a free zone, you can possibly avail corporate tax benefits if you meet the required criteria.

Tax Benefits for Cryptocurrency in Dubai

As the profits generated from the sale, staking, or mining of cryptocurrencies cannot be taxed in Dubai, crypto enthusiasts can have excellent saving advantages. By moving to Dubai, crypto entrepreneurs, traders, and individuals with significant crypto holdings can possibly secure excellent tax advantages.

No Personal Income Tax

For those unfamiliar, income tax means the tax applicable to the personal income of the individual. As an example, in a country like Russia, an individual must pay an income tax of 13% on this personal income. This is not the case in Dubai, where individuals benefit from 0% personal income tax. This also applies to your crypto holdings as you will not have to pay income tax for it.

No Capital Gains Tax

Capital gains means the profit obtained from selling a capital asset at a price higher than what it was originally purchased at. Examples of capital assets include land, vehicles, buildings, etc. Cryptocurrency is also a capital asset. However, unlike other countries, the UAE has no capital gains tax on your crypto profits.

Tax Residency in Dubai

It is necessary to note that your cryptocurrency earnings in Dubai may be taxed in your home country. Fortunately, the UAE has signed treaties with numerous countries to avoid double taxation of incomes. If you are a citizen of one of these countries, you can take advantage of these double tax avoidance agreements. However, it is necessary for you to first prove that you are a tax resident in the UAE. To demonstrate your tax residency in the UAE, obtaining a Tax Residency Certificate (TRC) in Dubai or any other Emirates is necessary. Certain eligibility criteria must be fulfilled to obtain tax residency in the UAE. One of the most important requirements is that the UAE must be the primary or habitual country of the individual’s residence and financial interests.

InZone is a leading business setup consultancy in the UAE and can assist you in setting up a crypto-based business in Dubai and other Emirates. With an expert advisory team by your side, you can rest assured of being matched with the ideal setup package and jurisdiction for launching your business.