UAE Vat Implications of NFT Dealings

1)   What is NFT?

NFT is a type of digital asset that represents ownership or proof of authenticity of a unique item or piece of content.

2)   Consideration

NFTS are paid with cryptocurrency.

3)   Mechanism of NFT Dealing

Seller and Developer

• NFT seller or developer lists the NFT on marketplace.

NFT Market Place

• Place where the seller lists the NFT, and buyer purchased it directly from the NFT market place

Buyer

• Buyers of NFT can purchase the NFT directly from the market place.

4)   UAE VAT regarding NFT dealings:

UAE VAT has not yet published any guidance related to the VAT treatment of NFT and cryptocurrency transactions.

5)   Possible VAT implications of NFT dealing

Seller

• A sale of NFT may be considered as supply of electronic services subject to UAE VAT. So, VAT treatment may be determined based on the place of use and enjoyment.

NFT Market Place

Market Place may receive listing fees and commissions for providing electronic services and can be considered as the disclosed or undisclosed agent. So, VAT treatment may be determined based on the place of use and enjoyment.

Buyer may have to pay VAT on its purchases of NFT from market place.

6)   Gray Area in NFT Dealings

As NFT dealings are paid in the form of cryptocurrency, it is not clear what conversion rate will be used to determine the AED value for VAT purposes.

7)   How can Crowe help? 

• Assist in determining whether VAT registration is necessary for individuals or businesses engaged in NFT transactions.
• Assist in obtaining private clarification from the FTA.
• Analyze the VAT treatment of NFT transactions from the seller, buyer, or marketplace perspective.