1. The Legal and Regulatory Landscape

The UAE’s legal approach to crypto sits at the intersection of federal tax laws, financial services regulation, and anti-money laundering (AML) compliance. The core building blocks are:

• Corporate Tax Law (Federal Decree-Law No. 47 of 2022), which applies to business income and includes free-zone exemptions under the Qualifying Free Zone Person (QFZP) regime.

• Cabinet Decision No. 100 of 2024, which amended the VAT Executive Regulations to specifically address “virtual assets” and created targeted exemptions.

• FTA public clarifications and guides, including VATP039 (which clarified that mining does not qualify for the VAT exemption), VATP040, and the May 2024 Free Zone guidance.

• Central Bank and AML frameworks, which require banks and financial institutions to identify and avoid unlicensed virtual asset providers.

• Local regulators (ADGM FSRA, DIFC DFSA, Dubai VARA, and SCA), which issue licenses for exchanges, custodians, and brokers.

Taken together, these measures create one of the most comprehensive frameworks in the region.

 

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2. Corporate Tax and Cryptocurrencies

Business Profits Are Taxable

Companies engaging in crypto-related activities—whether exchanges, custody providers, trading desks, or mining operations—are subject to the UAE’s corporate tax regime. Business profits are taxable at 9% above the small business threshold, unless the entity qualifies as a QFZP.

Free Zone Considerations

Free-zone companies enjoy a 0% rate on “qualifying income.” The FTA’s May 2024 guidance clarified that some crypto-related revenues may fall within this regime, provided substance requirements and activity definitions are satisfied. However, whether crypto exchange income or proprietary trading profits qualify depends on the specific facts and regulatory classification of the activity.

Activity Mapping

• Exchanges and brokers: income from trading fees and commissions is taxable.

• Market makers and proprietary traders: profits are taxable unless exempted through free-zone qualification.

• Custodians: revenues from custody services are taxable, and licensing is usually required under ADGM, DIFC, or VARA rules.

• Mining: commercial mining is treated as a business; profits are taxable, and VAT exemptions do not apply to mining activity.

 

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3. VAT and Virtual Assets

The 2024 Amendments

Cabinet Decision No. 100 of 2024 fundamentally changed the VAT treatment of cryptocurrencies. Transfers and conversions of virtual assets are now largely VAT-exempt, aligning their treatment closer to financial services such as currency exchange. This marks a significant shift from earlier practice, where crypto-for-crypto transactions risked being treated like barter transactions subject to VAT on both legs.

Key Clarifications

• Conversions and transfers: generally exempt from VAT.

• Custody and management: may also be VAT-exempt, depending on service classification.

• Mining: expressly excluded from VAT exemptions. The FTA’s VATP039 clarification confirmed that mining activities do not benefit from the new exemptions.

Practical Impact

The new VAT rules simplify compliance for exchanges and custodians but leave mining and certain novel activities (such as staking or DeFi protocols) in a grey area. Businesses should carefully review their service flows against the FTA’s clarifications to determine VAT obligations.

 

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4. Individuals and Crypto Holdings

No Personal Income Tax

The UAE imposes no personal income tax. For individuals holding cryptocurrencies as personal investments, gains from sales or appreciation are not taxed.

When Does Trading Become a Business?

The distinction between an “investment” and a “business” is critical. While casual, long-term holding or occasional selling is treated as investment activity and not subject to corporate tax, individuals who engage in systematic trading may cross into business activity.

Indicators of Trading Activity

Tax and regulatory practice in comparable jurisdictions, as well as UAE corporate tax principles, suggest that the following factors could indicate business activity:

• Frequency and volume of transactions (daily or high-frequency trading as opposed to occasional disposals).

• Commercial intent: trading with a view to generating consistent profit, rather than simply realizing an investment.

• Use of infrastructure: reliance on dedicated trading systems, professional tools, or acting similarly to a proprietary trading desk.

• Holding structure: if an individual sets up an entity to conduct trading or represents themselves as a trader to third parties, this may constitute business.

In practice, the FTA has not published bright-line rules, but individuals who regularly trade with significant volume or run organized trading strategies should assume their activity may be classified as a business. In such cases, establishing a corporate structure and accounting for corporate tax will be the prudent approach.

 

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5. Banking and Custody of Cryptocurrencies

Depositing Crypto with Banks

UAE banks do not accept direct deposits of Bitcoin or other tokens into AED accounts. Instead, individuals must convert crypto into fiat through a licensed virtual asset service provider (VASP). Banks then accept the fiat proceeds, provided the source of funds is transparent and compliant with AML standards.

Conversion to Fiat

Some UAE banks now offer integrated crypto-to-fiat services in partnership with licensed platforms. For example, Emirates NBD has launched Liv X, a retail trading platform, while international players such as Standard Chartered are rolling out institutional custody and settlement solutions. These arrangements allow individuals and companies to convert crypto into AED or USD, with settlement into traditional bank accounts.

Withdrawals and Access

Once crypto has been converted into fiat and deposited, withdrawals are generally available on demand, subject to normal AML monitoring. However, large transfers may be delayed pending enhanced due diligence. Banks reserve the right to freeze or reject transactions linked to unlicensed platforms or high-risk jurisdictions.

Custody Services

Direct custody of crypto by UAE banks remains limited, though partnerships with global custodians are expanding. Institutional-grade custody services are emerging in Abu Dhabi and Dubai, often under the ADGM FSRA or VARA frameworks.

 

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6. AML and Regulatory Risks

The Central Bank and financial regulators are clear: transactions with unlicensed VASPs are prohibited. Banks will scrutinize inflows from offshore exchanges or peer-to-peer transfers that lack verifiable licensing. Clients should therefore:

• Use licensed exchanges and custodians in the UAE.

• Maintain complete transaction records, including wallet addresses and exchange statements.

• Be prepared to demonstrate the source of funds and nature of transactions.

This is not only critical for banking access but also for demonstrating tax compliance if challenged.

 

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7. Compliance Checklist for Companies and Individuals

• Determine entity status: mainland, free zone, or individual.

• Map activities: trading, mining, custody, staking.

• Review VAT position: check whether exemptions apply; mining is taxable.

• Bank through licensed VASPs: avoid unlicensed providers to prevent account freezes.

• Document everything: keep detailed transaction histories, wallet addresses, and KYC documentation.

• Assess trading activity: high-frequency or organized trading by individuals may trigger business classification.

 

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8. What to Watch Next

Several developments are on the horizon:

• International reporting standards (CARF): the UAE is preparing to align with the OECD’s Crypto-Asset Reporting Framework, which will increase global information exchange.

• Stablecoin and digital dirham frameworks: the Central Bank is piloting a CBDC (digital dirham), which may influence how crypto-to-fiat conversions work in practice.

• Bank participation: more banks are expected to roll out crypto custody and trading services, increasing access for both individuals and corporates.

 

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Conclusion

The UAE’s tax and regulatory treatment of cryptocurrencies is becoming increasingly sophisticated. Businesses must treat crypto activity as taxable unless exemptions clearly apply, and individuals must recognize that active trading may constitute business income. On the banking side, licensed VASPs are the essential bridge between crypto and fiat, and AML compliance remains the overriding concern.

For companies and individuals who plan ahead, maintain full documentation, and operate within the licensed framework, the UAE offers a supportive and forward-looking environment for digital assets.

At Berkley Limited, we go beyond traditional compliance services—positioning ourselves as strategic partners who empower your business to thrive. Licensed by the ADGM (License No. 17269), our seasoned in-house team works seamlessly with carefully selected local and international associates to offer bespoke solutions in audit, accounting, tax, and advisory services. We tailor our approach to meet each client’s unique needs, allowing them to stay compliant while focusing on their core business objectives.

Our vision is simple yet profound: to add meaningful value to every task we undertake and to serve not just as a service provider, but as a trusted ally for businesses navigating the complexities of today’s global environment. Rooted in the principles of value, integrity, and trust, Berkley delivers not only compliance—but genuine confidence. Experience the difference of a firm dedicated to your success.

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📩 Get in Touch 📍 Berkley Limited – Abu Dhabi Global Market (ADGM), License No. 17269

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