VAT on Crypto Mining in UAE | Key Implications & Insights

Overview

Cryptocurrency is a digital asset that is transferred between individuals through cryptography where banks are not involved. Crypto mining is a process of verifying the transactions between them through a computerized system and adding them to a blockchain. The big question is ‘Is crypto mining taxed?’ while the answer to this is yes, it varies from country to country. In this article, you’ll get a brief insight about what is cryptocurrency, crypto mining, and how it is taxed specifically in the UAE.

Understanding Cryptocurrency and Crypto Mining

The complexity of understanding the concept of cryptocurrency and crypto mining is increasing eventually. On the other side, there are people with good potential to get into crypto trading but they aren’t able to due to lack of knowledge. To summarize it in general terms, these are digital currencies that are traded between two or more individuals/institutions through a blockchain system and stored in a public ledger (in this context – a ledger is a digital track record of all the transactions to maintain transparency & security).

Crypto mining is all about verifying the transactions and storing them in the blockchains using specialized computers known as mining rigs. These systems involve complex cryptography (a process of protecting the end-to-end transaction) equations. There are two types of mining: 

Self-mining: Individuals mine for their accounts using their computational resources.

Mining on Behalf of Others: Miners provide their computational power to others in exchange for a fee.

VAT Implications on Crypto Mining

On January 14, 2025, the UAE Federal Tax Authority (FTA) released an important public clarification on the VAT treatment of cryptocurrency mining. It distinguishes between mining conducted for personal use and mining performed on behalf of others, outlining the respective VAT obligations for each. To understand this you need to know what UAE VAT law states “FTA announced a standard VAT rate of 5%. However, the FTA categorized a few goods and services under zero-rated supply and exempt supplies where no tax is charged.” – Based on the type of transactions in the VAT is implicated.

Cryptocurrency Mining for Own Account

An individual engaged in cryptocurrency mining for personal use contributes computational power to the network without providing it to any specific recipient. Consequently, mining for one’s account is not classified as a taxable supply under VAT law, and any rewards received are not considered payment, placing them outside the scope of VAT. 

Cryptocurrency Mining on Behalf of Another

When a person mines cryptocurrency on behalf of another for a fee, it is considered a supply of services. If a taxable person provides this service to a customer in the UAE, it will be subject to the standard 5% VAT rate. However, the service may qualify for zero-rating if supplied to a non-resident, provided all conditions under Article 31 of Cabinet Decision No. 52 of 2017 on the Executive Regulation of Federal Decree-Law No. 8 of 2017 on Value Added Tax, and its amendments, are met.

Here is a catch! – You can recover your taxes on crypto mining – Through Input Tax

What is input tax?

Input tax is a part of Value Added Tax (VAT) paid by a business on purchases and expenses related to its taxable activities. Businesses can typically recover input tax by deducting it from the VAT they collect on sales (output tax), thereby reducing their overall tax liability.

• Recoverable Input Tax – If the expense is related to taxable supplies (e.g., purchasing raw materials for resale), businesses can claim a refund or offset it against output tax.
• Non-Recoverable Input Tax – If the expense is related to exempt or non-taxable activities (e.g., personal expenses, VAT-exempt supplies), input tax cannot be reclaimed.
• Net VAT Payable – Businesses pay the government the difference between output tax (VAT on sales) and input tax (VAT on purchases).

Cryptocurrency Mining for Own Account: Input tax on mining-related expenses (such as hardware and utilities) is non-recoverable, as the activity is not classified as a taxable supply.  

Cryptocurrency Mining on Behalf of Another: Input tax on expenses related to mining (including hardware and utilities) can be recovered, as it is associated with a taxable supply.

Key Takeaways

A highly skilled individual can mine cryptocurrency for their account or others can continue doing this as a service in the UAE. However, they are liable to pay VAT based on the returns they get in the services if it goes above 5% of the profit. The concept is too overwhelming to understand, contact one of our experts from Arnifi and get 100X clarity on VAT implications on crypto mining in UAE.

Also Read: Reverse Charge Mechanism in UAE VAT