The UAE’s Federal Tax Authority (FTA) has issued a new directive setting out how businesses must convert the value of digital currencies into UAE dirhams when filing their Value Added Tax (VAT) returns.
Directive on Tax Transactions No. 3 of 2026 applies to any taxable person supplying a digital currency, or supplying goods or services where the consideration is received in digital currency.
Under the directive, such businesses must convert the value of the digital currency into dirhams for disclosure purposes in their tax return, following a specific three-step mechanism.
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The UAE is seeing rapid growth in digital-asset adoption, with activity increasingly extending beyond speculative crypto trading into payments and commercial use.
According to Chainalysis’ 2025 Geography of Cryptocurrency Report, the UAE received more than $56 billion in cryptocurrency value in the 2024-25 reporting period, representing 33 per cent year-on-year growth.
More significantly, smaller retail crypto transactions worth less than $1,000 increased 88.1 per cent, while large retail transactions rose 83.6 per cent.
Chainalysis said the expansion in merchant services suggests crypto is moving towards more practical, everyday uses among consumers and businesses.
The Central Bank of the UAE (CBUAE) has been developing the Digital Dirham, the country’s central bank digital currency, for retail, wholesale and cross-border payments.
The CBUAE’s 2025 Annual Report says a Digital Dirham wallet was developed to support retail and wholesale use cases, while the first live government transaction using the Digital Dirham was completed in 2025.
The UAE implemented a 5 per cent VAT rate in January 2018 as part of the GCC-wide framework agreed upon by the Arab countries.
How the conversion works
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 carried out within the same calendar year.
They must then calculate the numerical average of the exchange rates for the digital currency in question, as published by the three chosen platforms, using the rates that prevailed at the date and time of the supply, or the date and time the consideration was received, whichever is applicable.
The value of the digital currency is then converted into UAE dirhams using this calculated average.
Record-keeping requirements
Businesses are required to retain records proving the exchange rates obtained from each of the three platforms, in addition to their other existing record-keeping obligations relating to the supply.
The FTA said it would issue a separate public clarification covering the procedure to be followed in cases where a digital currency’s exchange rate is not available on three platforms from its published list.
The authority has also released its approved list of centralised public digital currency exchange platforms for the purposes of the directive. It currently includes five platforms: Binance, Bybit Fintech, Deribit, Bitget, and Payward.
Source: Khaleej Times