With the rising popularity of cryptocurrencies, understanding the VAT treatment of crypto mining has become essential for businesses and individuals operating in the UAE. This guide is based on FTA Public Clarification VATP039 and explains how VAT applies to different mining scenarios.
Crypto mining is the process where specialized computers (mining rigs) validate blockchain transactions for a specific cryptocurrency. Miners may receive rewards for contributing computational power.
A miner can either:
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Mine for their own account
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Mine on behalf of another person
1️⃣ Mining for Own Account
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Mining crypto for personal use is not a taxable supply.
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Rewards received (e.g., Bitcoin, Ethereum) fall outside the scope of VAT.
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Any input VAT incurred on mining expenses cannot be recovered, as the activity does not constitute a taxable supply.
2️⃣ Mining on Behalf of Others
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Mining services provided to another person for a fee are considered a taxable supply of services.
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If the service is supplied by a taxable person in the UAE, VAT is charged at the standard 5% rate.
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Services supplied to a non-resident may be zero-rated if conditions under Article 31 of the Executive Regulation are met.
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Input VAT incurred in providing these services may be recoverable, provided it is used to make taxable supplies and supporting evidence is retained.
Mining expenses for personal mining activities are non-recoverable.
Mining as a service for another person allows partial or full recovery of input VAT related to taxable supplies.
Eligible expenses may include hardware purchases, electricity, commercial space rental, utilities, and maintenance services.
Submitting incorrect or incomplete information can lead to:
FTA expects accurate disclosure and proper evidence for related-party relationships and turnover.
Federal Decree-Law No. 8 of 2017 on Value Added Tax
Cabinet Decision No. 52 of 2017 on the Executive Regulation
Article 1: Definitions of virtual assets, taxable supply, registrant, and consideration
Article 2 & 3: Taxable supply and deemed supply
Article 31: Conditions for zero-rating services supplied to non-residents
Article 48: Treatment of imported goods/services
Article 54: Rules for input tax recovery
| Mining Type | VAT Treatment | Input VAT Recovery |
|---|
| Own account | Not taxable / outside scope of VAT | Not recoverable |
| On behalf of another person | Taxable supply (5% standard or 0% zero-rated) | Recoverable if used for taxable supply |
Keep records of mining activities, rewards, and related invoices.
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Distinguish between personal mining and providing mining services.
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Retain supporting evidence for all recoverable input VAT claims.
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Consult a tax advisor before zero-rating services for non-residents to ensure compliance.
Disclaimer: This blog is intended for educational purposes and reflects the FTA Public Clarification VATP039. It does not constitute legal advice. Businesses should consult their tax advisors for case-specific guidance.
