Dubai: While VAT exemptions on crypto transactions and select financial services comes as a big break, businesses in the UAE will also be getting savings on their group medical insurance costs.
This comes after the UAE Ministry of Finance updated its exemptions list for VAT payments on Saturday (October 5), with extensive detailing of those business and related transactions coming under this ambit. (The changes come into effect November 15.)
“The amended regulations will allow businesses to recover the input VAT on health insurance provided to employees and their dependents,” said Sumayya Zain, Managing Partner at Hallmark International Auditing.
This also applies to coverage provided by the employer for:
- The employee’s spouse; and
- Up to three children under the age of 18.
“This change expands the scope of VAT recovery, offering significant benefits for businesses in managing health insurance costs,” said Sumayya. “earlier, they were not allowing input VAT on dependent insurance.”
Indeed, the timing would be seen as ideal by businesses and organisations ahead of their annual group medical insurance renewals for 2025. Health insurance coverage premiums had risen sharply in the last 2 years after a relative lull during the Covid phase and immediately thereafter.
Thus, any savings from the new exemptions on VAT for group medical cover is a major plus for businesses.
Big break for crypto transactions
The biggest focus in the hours after the Ministry of Finance released its updated exemption list was from the financial services sector.
There will be VAT exemptions on:
- The transfer of ownership of virtual assets, including virtual currencies.
- The conversion of virtual assets.
- Keeping and managing virtual assets.
Plus, the VAT exemption applies to the ‘management of investment funds’.
This applies to ‘services provided by the fund manager independently for a consideration’, and for licensed funds operating in the local market.
The VAT exemption will include - but not limited to - the management of the fund’s operations, management of investments for or on behalf of the fund, (as well as) monitoring and improvement of the fund’s performance’, according to the Ministry of Finance.
On why the Ministry brought out the amendments now, Younis Haji Al Khoori, the Under-Secretary, said: “We believe these amendments will help minimise misunderstandings or incorrect applications of the law, as well as simplify procedures for taxpayers in line with international best practices.
“The Ministry is committed to coordinating with relevant stakeholders from both the public and private sectors and working to update our regulations to enhance the UAE's business environment.”
Crypto-based transactions have gained wide acceptance in the UAE, and according to a recent report by the tech firm Chainalysis, what’s striking is that such deals are engaged in extensively by retail investors, even on smaller ticket ones.
According to the Ministry, “Certain services related to virtual assets will be exempt from VAT as part of efforts to support innovation and advanced financial technology, further positioning the UAE as a prominent center for virtual asset investment.”
The UAE already has one of the more broad ranging regulatory environments for anything to do on crypto and related operations, through Dubai’s VARA (Virtual Assets Regulatory Authority) and the ADGM in Abu Dhabi.
“The UAE’s support for blockchain and DeFi (decentralized finance) has led to tax exemptions for crypto traders as well,” said Razan Hilal, Market Analyst at Froex.com
“This approach reflects the country’s commitment to attracting crypto innovation and solidifying its position as a global economic leader, underpinned by a tech-focused foundation.”
The Article 42, Clause 2 of the new Executive Regulation defines 'financial services' as including the transfer of ownership of virtual assets, including virtual currencies, the conversion of Virtual Assets, the keeping and managing of virtual assets.
"These activities are exempt when they are not conducted in return for an explicit fee, discount, commission, rebate, or similar," said Sumayya.
Charity contributions
The changes announced by the Ministry of Finance also allow for exemption on 'in-kind donations between charitable and government entities'. These need to be valued at up to Dh5 million over a 12-month period, from the provisions of legal supply.
"This allows donors to recover the VAT incurred on these in-kind donations in accordance with the VAT law, aimed at easing the burden on these entities and enhancing their societal role," the Ministry added.
