Crypto payments must be converted to dirhams for VAT under FTA directive

The UAE’s Federal Tax Authority has issued a new directive setting out how businesses must convert the value of digital currencies into UAE dirhams when filing their VAT returns. The directive applies to any taxable person supplying a digital currency, or supplying goods or services where the consideration is received in digital currency. Businesses must convert the value of the digital currency into dirhams for disclosure purposes in their tax return, following a specific three-step mechanism. Taxable persons must first select three exchange platforms from a list of centralised public digital currency exchange platforms published by the FTA, and must use the same three platforms consistently for all transactions within the same calendar year. They must then calculate the numerical average of the exchange rates from the three chosen platforms, using the rates at the date and time of the supply or consideration. The value is then converted into dirhams using this average. Businesses must retain records proving the exchange rates obtained from each platform.