The Federal Tax Authority's VAT Public Clarification VATP039 draws the line that decides whether a UAE mining operation can recover VAT on its rigs, rent and power. Mining proof-of-work cryptocurrency for your own account is outside the scope of VAT, and the input tax on that activity is therefore not recoverable at all. Mining for someone else for a fee is a taxable supply of services, and input tax becomes recoverable to the extent it is incurred to make that supply. The same hardware can fall on either side of the line depending on who the computational power is contributed to.
Who should read this
A mining business that has been recovering input tax on rigs, power and warehouse rent while mining for its own account has been recovering tax it was never entitled to, and the exposure sits in filed returns rather than in future planning.
Directly affected
Key facts
- VATP039 was issued by the Federal Tax Authority on 13 January 2025 and addresses the proof-of-work mechanism specifically.
- Mining for a person's own account is not a taxable supply and falls outside the scope of VAT: there is no identifiable recipient and no close nexus between the activity and the block reward.
- Because the own-account miner makes no taxable supply, input tax on hardware, commercial rent, utilities and maintenance cannot be recovered.
- Mining on behalf of another person for consideration is a taxable supply of services, standard-rated where the customer is in the UAE.
- That service may be zero-rated where the recipient is a non-resident and the conditions in Article 31 of Cabinet Decision No. 52/2017, the VAT Executive Regulation, are met.
- Where a UAE VAT-registered business buys mining services from a non-resident it accounts for the tax under the reverse charge mechanism; where the UAE customer is not a taxable person, the non-resident supplier must itself register and charge VAT.
What this means for you
The reasoning matters more than the conclusion, because it is what makes the outcome predictable in arrangements VATP039 does not describe. The FTA treats own-account mining as outside the scope because the miner contributes computational power to a network rather than to any identifiable recipient, and because a reward depends not on solving the cryptographic problem but on being first to solve it — so the reward is not consideration for a supply. Read that way, the irrecoverable input tax is not a concession or an oversight; it follows inevitably from there being no taxable supply to attribute the cost to. The planning point is structural. An operator that hosts rigs, sells hashing power or runs a facility for customers is making a taxable supply and recovers input tax to the extent of it; the same operator mining its own treasury position does not. A mixed operation will need apportionment and the evidence to support it, including tax invoices. Two gaps deserve flagging to clients rather than glossing. VATP039 is expressly about proof-of-work, so staking and proof-of-stake rewards are not addressed and should not be assumed to follow the same analysis. And the zero-rating route repays reading Article 31 in both directions, because it is narrower than it looks in one respect and wider in another. Narrower: Article 31(3) withholds zero-rating where the performance of the services is, or is reasonably foreseeably, received in the UAE by another person such as an employee or director of the non-resident customer — but only where it is also reasonably foreseeable, when the agreement is entered into, that the person in the UAE will receive services on which input tax is not recoverable in full under Article 54 or Article 57 of the Decree-Law. Both limbs must be satisfied before the exception bites. Wider: Article 31(2) deems a recipient to be "outside the State" where it has only a short-term presence in the UAE of less than 30 days that is not effectively connected with the supply, so a brief visit on unrelated business does not of itself cost the supply its zero rating.
Directly affected: Mining operators and hosting providers, data centre and warehouse operators serving them, funds and treasury functions holding mined positions, and non-resident suppliers of hashing power to UAE customers
Effective date: Published 13 January 2025
Action items
- Separate own-account mining from mining supplied to customers in the accounting records, because the input tax treatment diverges completely between them
- Review input tax already recovered on hardware, rent, power and maintenance attributable to own-account mining, and quantify the exposure before the FTA raises it
- Where mining services are supplied to non-residents, test each Article 31 condition on the facts — including whether the Article 31(3) irrecoverability limb is met at all — rather than assuming either that export means zero-rated or that a short unconnected visit to the UAE defeats it
- Check whether reverse charge has been applied to hashing power or hosting bought from non-resident suppliers, and whether a non-resident supplier to a non-taxable UAE customer should have registered
- Retain tax invoices and apportionment workings for any mixed operation, since recovery depends on evidence that the cost was incurred to make taxable supplies
- Treat staking and proof-of-stake rewards as an open question, because VATP039 addresses proof-of-work only
Litigation impact
The disputes this produces are assessment disputes about attribution rather than about principle. Where an operator mined for its own account and supplied hashing power from the same facility, the contemporaneous records — hosting agreements, customer invoices, pool configuration and wallet attribution — will decide how much input tax survives, and reconstructing that evidence after an FTA query is materially harder than keeping it.
Source
Federal Tax Authority, VAT Public Clarification VATP039 — Crypto Currency Mining
https://tax.gov.ae/en/legislation.and.rulings/public.clarifications.aspx
Original-source date: 13 January 2025 · Captured: 2026-10-31T12:54:34+04:00
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