Major Changes To UAEs VAT Rules Impact Fund Managers And Virtual Asset Traders – All You Need To Know

The Federal Tax Authority published amendments to the Executive Regulation of Federal Decree-Law No. 8 of 2017 on Value Added Tax on Oct. 2, bringing significant changes for financial services companies.

Fund managers exempt

Fund managers now have a VAT exemption for services provided independently to funds licensed by a competent authority in the UAE. This includes management of fund operations, managing investments for or on behalf of the fund, and monitoring and improving fund performance.

• Management of UAE-licensed investment funds now VAT exempt
• Covers fund operations management and performance monitoring
• Direct impact on investment, pension and mutual fund managers

“This change directly impacts the financial services sector, especially companies involved in managing investment funds, pension funds, or mutual funds,” said Shamma Alfalahi, Partner and Head of Tax at BSA Law.

Crypto gets clarity

The FTA has exempted virtual asset transactions from VAT, applying retrospectively from January 2018.

The move covers:

• Transfer of ownership of virtual assets, including cryptocurrencies
• Conversion of virtual assets

“In previous versions, digital assets were not specifically addressed, leaving businesses uncertain about how to handle VAT obligations on cryptocurrencies and other blockchain-based assets,” Alfalahi explained.

The regulations define virtual assets as digital representations of value that can be traded or converted for investment purposes, excluding digital versions of traditional currencies and financial securities.

Business impact

The changes require immediate action from affected businesses. Fund managers must analyse their VAT exemption eligibility and review their tax recovery position, while virtual asset traders need to examine their historic VAT positions and consider voluntary disclosures for past returns.

“These changes are more than regulatory updates—they’re strategic shifts that require careful planning and proactive management,” noted Alfalahi.

The amendments also introduce several practical changes:

• Supplies of goods worth less than AED500 to each recipient within a 12-month period are not considered deemed supplies
• Businesses can recover input tax on health insurance provided to employees and their dependents (up to one spouse and three children) free of charge
• Companies can apply to use a specified recovery percentage based on the previous tax year

“These changes represent the most comprehensive update to the UAE’s VAT framework since its introduction,” Alfalahi said. “Businesses across all sectors should review their compliance positions, but particularly those in fund management and virtual assets trading.”

Other key clarifications include expanded definitions of real estate supply beyond sale and tenancy contracts, removal of VAT obligations for transfers between government entities, and new restrictions on simplified tax invoice issuance when reverse charge mechanism applies.

“The retrospective application of virtual asset exemptions means many businesses may need to reassess their historical VAT positions dating back to 2018,” she added. “This isn’t just about future compliance – it’s about correcting past positions as well.”