How UAE Corporate Tax & Other Taxes Impact Crypto Businesses

Advisory, Cryptocurrency, Finance

The UAE corporate tax significantly affects businesses’ cryptocurrency-related activities, while personal investments remain untaxed. The application of the tax depends on whether the activity is classified as a commercial enterprise or a personal investment. Businesses engaging in crypto-related activities are subject to the UAE’s federal corporate tax regime.

Tax Rate: The standard corporate tax rate is 0% for taxable profits up to AED 375,000 and 9% on profits exceeding this threshold.

Taxable Activities: The 9% tax applies to business income from various activities, including:
1. Operating cryptocurrency exchanges or trading platforms.
2. Commercial-scale mining or staking operations.
3. Providing crypto custody, brokerage, or advisory services.
4. NFT studios and marketplaces.
5. Receiving cryptocurrency as payment for goods or services as a registered business.

Free Zones: Companies registered in a UAE free zone may qualify for a 0% corporate tax rate on “qualifying income”. To maintain this benefit, they must meet specific economic substance requirements and usually cannot conduct business directly with the UAE mainland. Stated differently, to maintain Qualifying Free Zone Person (QFZP) status, the target entity must adhere to stringent Economic Substance Regulations (ESR), demonstrating that its core income-generating activities (CIGA) are conducted outside the mainland UAE. Any deviation herein will trigger the 9% CT rate on taxable income.

VAT: While the transfer and conversion of virtual assets are generally exempt from Value Added Tax (VAT) under Cabinet Decision No. 100 of 2024, the standard 5% VAT may still apply to related services, such as consulting, hardware sales, or commercial mining services provided to others.

No Personal Income or Capital Gains Tax: The UAE does not impose personal income tax or capital gains tax on individuals. Therefore, profits from an individual’s private buying, holding, or selling of cryptocurrencies are generally tax-free.

Business vs. Investment Distinction: A critical distinction is between personal investment and commercial activity. Factors that may classify an individual’s activity as a business (and thus subject to corporate tax) include:
1. High frequency and volume of transactions.
2. The intent is to generate consistent profits rather than long-term capital appreciation.
3. Use of dedicated business infrastructure or professional trading tools.

Al Adly & Co.’s Forward-Thinking approach ensures that the valuation you place on a UAE crypto asset is not an optimistic guess, but a financially defended, legally compliant figure—protecting the shareholder value long after the deal closes.

Contact Al Adly & Co. to book your senior partner consultation today.

Contact Us