Public clarification on Cryptocurrency mining

On 14th January 2025, the Federal Tax Authority (FTA) published a VAT Public Clarification (VATP039) on Cryptocurrency mining.

This publication follows the recent extension of the VAT exemption to certain activities involving Virtual Assets made under Cabinet Decision No. 100 of 2024 on the Executive Regulation of Federal Decree-Law No. (8) of 2017 on Value Added Tax (VAT), and its amendments.

Within the Public Clarification, cryptocurrency mining is described by the FTA as the process where specialized computers, also known as mining rigs, validate blockchain transactions for a specific crypto currency, for which a reward may be received for the contribution of computational power.

• Based on the Public Clarification, it is confirmed that the scope of the VAT exemption for Virtual Assets does not include cryptocurrency mining.
• Cryptocurrency mining on behalf of another person is a taxable (5% or 0%) supply of services on the basis that the miner earns a fee from the person in return for their mining activities.
• Cryptocurrency mining by a person for their own account is not a taxable supply on the basis that:
  • There is not sufficient nexus between the reward received by the network and the mining activity performed by the miner; and 
  • There is no identifiable recipient of the mining activities.
• Input tax is recoverable on the related costs where the person is making a taxable supply of mining activities (i.e. the miner is mining cryptocurrency on behalf of another person).
• If the cryptocurrency mining is performed by a person for their own account, it is the FTA’s view that the costs incurred (e.g. purchase of hardware, space rental etc.) to perform the mining activities are not recoverable from a VAT perspective. We recommend that taxpayers consider their entitlement to input tax recovery on a case-by-case basis.
• If a taxable person receives cryptocurrency mining services from a non-resident person, the taxable person is required to self-account for VAT under the reverse charge mechanism.
• If a non-resident person supplies cryptocurrency mining services to a UAE resident business and a non-taxable person, the non-resident person must register and account for UAE VAT on the supply made.

While this Public Clarification provides clarity on cryptocurrency mining, there are still some further questions open for consideration such as:

• Is cryptocurrency mining on behalf of another person classified as an electronic service?
• Should similar principles apply to staking activities?

KPMG has a team of experienced tax specialists that can help you assess your current tax position, advise on the appropriate tax treatment, prepare clarification requests, or represent you in front of the FTA as registered tax agents.

We are happy to discuss your specific circumstances with you and determine the way forward should you have any questions or concerns in this regard. Please get in touch with your usual KPMG contact or any of the tax professionals below.