According to the UAE Ministry of Finance, the VAT exemption will include managing investments made for or on its behalf and tracking and enhancing the performance of the funds.
While the VAT exemptions on some financial services and cryptocurrency transactions are a huge benefit, the new law also benefits businesses in the UAE to save money on group health insurance premiums.
The UAE Ministry of Finance revised its list of exemptions from paying VAT, providing comprehensive information on the companies and associated transactions that fall under this category on October 5, but the modifications take effect on November 15.
The revised laws will enable companies to recover the input VAT on health insurance provided to workers and their dependents. It also applies to any coverage that the employer offers to their spouse and their three children under the age of 18.
This revision opens up the scope of VAT recovery and offers many benefits for companies in controlling health insurance costs. In the past, they prohibited input VAT on dependent insurance.
It is ideal for businesses and organizations as it coincides with their yearly renewals of group medical insurance for 2025. The cost of health insurance has increased significantly during the past two years, after a brief decline during the Covid phase.
For this reason, any savings from the new VAT exemptions for group health insurance are incredibly beneficial to businesses.
Significant development for cryptocurrency transactions
After the Ministry of Finance published its updated exemption list, the financial services industry was the center of attention.
The transactions that are free from VAT are the ownership transfer of virtual currencies and other assets, digital resources conversion, and preserving and overseeing digital assets. Furthermore, the management of investment funds is exempt from VAT.
It applies to licensed funds that operate in the local market plus services provided independently for compensation by the fund manager.
According to the Ministry of Finance, the VAT exemption will include managing investments made for or on its behalf and tracking and enhancing the performance of the funds.
The Ministry made these modifications to minimize misinterpretations or improper application of the law and simplify taxpayer procedures in line with international standards.
The Ministry is working with public and private sector stakeholders to update the laws to improve the business environment.
In the United Arab Emirates, crypto-based purchases have gained increasing popularity. A recent analysis by the IT company Chainalysis highlights how common these transactions are among retail investors, especially for smaller-ticket ones.
The Ministry said that some services related to virtual assets would be exempted from VAT to support innovation and cutting-edge financial technology to establish the UAE as a leading hub for virtual asset investment.
Razan Hilal, a market analyst at Froex.com, states that supporting blockchain technology and decentralized finance has led to tax breaks for cryptocurrency traders in the UAE.
This strategy reflects the dedication to attracting crypto innovation and establishing its standing as a global economic leader.
Under Article 42, Clause 2 of the new Executive Regulation, financial services are defined as the transfer of ownership of virtual assets, including virtual currencies, the conversion of virtual assets, and the maintenance and control of virtual assets.
These acts are exempt if not conducted in exchange for a discount, commission, rebate, or something similar.
According to the Ministry of Finance, the new VAT changes ensure the integrity of the tax system, increase the effectiveness of tax administration, and strengthen tax compliance by giving the FTA the power to deregister taxpayers.
The changes made by the Ministry of Finance will allow donation exemption between nonprofit and government bodies. These must have a maximum value of Dh5 million for 12 months, as determined by the legal supply provisions.
It helps donors reclaim the VAT that the VAT laws imposed on these donations in cash, which was made to lessen the burden on these organizations and strengthen their social responsibility.
