The UAE Federal Tax Authority (FTA) has issued a new directive explaining how businesses must convert digital-currency values into UAE dirhams for VAT reporting. The rule affects taxable businesses that supply digital currency or accept digital currency as payment for goods and services. It matters because businesses now have a specific, auditable method for determining the AED value of these transactions.
- Location: UAE
- Organisation: Federal Tax Authority
- Status: Directive issued in July 2026
- Who is affected: Taxable persons dealing with relevant digital-currency transactions
- Business impact: A standard AED valuation and record-keeping method is now required for VAT reporting
- What’s next: The FTA is expected to provide further clarification for digital currencies without rates available across the required approved platforms
Businesses in the UAE that use digital currency for commercial transactions now have a clearer process for reporting those transactions for VAT purposes. The Federal Tax Authority has issued Directive on Tax Transactions No. 3 of 2026, setting out how the value of digital currencies must be converted into UAE dirhams for disclosure in VAT returns.
The directive applies to taxable persons supplying digital currency and businesses supplying goods or services where payment is received in digital currency. The key change is the introduction of a consistent valuation method based on rates from three FTA-approved exchange platforms.
How must businesses convert digital currency into AED?
Under the new UAE digital currency VAT rules, a taxable person must select three exchange platforms from the FTA’s approved list of centralised public digital-currency exchanges.
The same three platforms must then be used consistently for transactions during the same calendar year.
The AED value is calculated using the numerical average of the exchange rates published by those three platforms at the relevant date and time.
For a transaction involving a supply, the applicable rate is linked to the date and time of the supply. Where the digital currency is received as consideration, the relevant date and time of receipt is used.
This approach is particularly important because digital-currency prices can move significantly within a short period.
The FTA’s directive therefore moves businesses away from choosing a convenient exchange rate after the transaction and towards a consistent, documented valuation process.
Which exchanges can businesses use?
The FTA’s current approved list contains five centralised public digital-currency exchange platforms:
- Binance FZE
- Bybit Fintech FZE
- Deribit FZE
- Bitget
- Payward FZCO
Businesses need to choose three from the approved list and apply their selection consistently throughout the calendar year. The list may be relevant to companies accepting crypto payments, supplying digital assets or otherwise recording digital-currency transactions for VAT purposes.
Businesses must keep proof of the exchange rates
The new methodology also creates an important record-keeping responsibility.
Taxable persons must retain evidence showing the exchange rates obtained from each of their three selected platforms. This documentation supports the AED value reported in the VAT return and can be important if the business is subject to an FTA review or audit.
For businesses, this means the accounting process should capture more than just the final AED figure.
The transaction’s date, time, digital currency amount, exchange rates used and resulting AED value should be properly documented as part of the company’s records.
For companies processing frequent digital-currency payments, this could also mean reviewing whether their accounting or payment systems can automatically capture the required information.
The new rule does not introduce a crypto VAT
One important point for UAE residents and businesses is that the new directive should not be confused with the introduction of a new 5 per cent VAT charge on cryptocurrency.
The FTA’s earlier VAT clarification states that the transfer of ownership of virtual assets, including virtual currencies such as Bitcoin, and the conversion of virtual assets are exempt from VAT under the amended Executive Regulation, with the exemption applying retrospectively from 1 January 2018.
The 2026 directive instead establishes how digital-currency values should be converted into AED for VAT return disclosure in situations covered by the directive.
That distinction is important because the valuation rule and the underlying VAT treatment are separate issues.
Businesses should therefore assess each transaction based on the applicable UAE VAT rules rather than assuming that every transaction involving cryptocurrency is automatically taxable.
Digital Dirham is different from cryptocurrency
The UAE’s growing digital-currency framework also includes the Digital Dirham, but it should not be treated as the same thing as privately issued cryptocurrencies or other virtual assets.
The Central Bank of the UAE’s legal framework recognises digital currency issued by the Central Bank as legal tender. Federal Decree-Law No. 54 of 2023 expanded the legal definition of currency to include digital currency issued by the Central Bank, while also making clear that virtual assets are not treated as currency under that framework.
The distinction matters for businesses because a central bank digital currency and a privately issued virtual asset can have very different legal and regulatory treatment.
The Central Bank has also reported that the Digital Dirham progressed through implementation milestones during 2025, including a first live government transaction, as the UAE continues developing its digital payments infrastructure.
Why It Matters
For UAE businesses, the biggest practical change is consistency.
Companies that accept or deal in digital currency should review their VAT procedures and make sure they can:
- Select three approved exchange platforms.
- Use the same three platforms during the calendar year.
- Capture the relevant exchange rate at the required date and time.
- Calculate the numerical average correctly.
- Keep evidence supporting every conversion.
- Ensure the AED value recorded in their accounting system matches the value used for VAT reporting.
The FTA has also indicated that further clarification will be issued for cases where the relevant digital currency does not have an exchange rate available across three approved platforms.
For companies already using digital assets, the directive provides greater certainty. For businesses considering accepting cryptocurrency as payment, it also highlights the importance of having the right accounting and compliance systems in place before doing so.
FAQs
What are the new UAE digital currency VAT rules?
The FTA has introduced a prescribed method for converting digital-currency values into UAE dirhams for VAT return disclosure. Businesses covered by the directive must use three approved exchange platforms and calculate the numerical average of their rates at the relevant transaction time.
Which businesses are affected?
The directive applies to taxable persons that supply digital currency or supply goods and services where the consideration is received in digital currency.
How many crypto exchanges must a business use?
A taxable person must select three exchanges from the FTA’s approved list of centralised public digital-currency exchange platforms and use the same three during the calendar year.
Is the UAE introducing a new 5% VAT on cryptocurrency?
No. The directive establishes a valuation method for VAT reporting. The FTA has separately confirmed that the transfer and conversion of virtual assets, including virtual currencies such as Bitcoin, are exempt from VAT under the relevant amended rules.
What happens if a digital currency is not available on three approved exchanges?
The FTA has indicated that it will issue further clarification setting out the procedure for such cases. Businesses dealing with affected digital currencies should monitor further FTA guidance before deciding on a valuation method.
The UAE’s latest digital-currency VAT directive gives businesses a clearer way to determine the AED value of relevant digital-currency transactions. While it does not create a new VAT charge on crypto, it introduces a more structured approach to valuation, consistency and record-keeping.
For businesses operating in the UAE’s growing digital economy, reviewing accounting systems and VAT procedures now can help ensure transactions are properly documented and reported under the new framework.
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