Federal Tax Authority Clarifies VAT Treatment of Cryptocurrency Mining

The Federal Tax Authority (“FTA”) has issued a public clarification VATP039-Crypto-Mining.pdf on the VAT treatment of cryptocurrency mining. The key points are as follows: 

• Mining for personal use: If a person mines cryptocurrency for their own account, it is not considered a taxable supply and falls outside the scope of VAT. Consequently, any input VAT incurred on related expenses is not recoverable, as these costs are not linked to a taxable supply. 

• Mining on behalf of others: Providing mining services, such as supplying computational power to another party, is treated as a taxable supply of services. In this case, input VAT incurred may be recovered to the extent that it relates to making a taxable supply. 

• Definition of cryptocurrency mining: The FTA defines cryptocurrency mining as "the process where specialised computers, also known as mining rigs, validate blockchain transactions for a specific crypto currency, for which a reward may be received for the contribution of computational power." 

This clarification was published on 14 January on the FTA’s official website.