On 14 July 2026, the Federal Tax Authority issued the Directive on Tax Transactions No. 3 of 2026, prescribing — for the first time, and a development tax consultants in UAE have been anticipating for some time — a mandatory mechanism for converting the value of digital currencies into UAE Dirham for VAT Tax Return purposes. Until now, taxable persons transacting in crypto had no prescribed conversion methodology and adopted varying practices: exchange closing prices, aggregator indices, or internal treasury rates. That discretion has ended. The Directive fixes a single method — the numerical average of rates from three FTA-approved exchange platforms — and pairs it with an approved platform list published by the Authority.
Note: This Directive has not yet been published in the Official Gazette. Clause 6 provides for its publication in the Official Gazette, and its formal entry into effect follows that publication. Businesses should treat the mechanism described below as imminent and prepare accordingly, while monitoring the Gazette for the publication date.
Who is Covered
The Directive applies to a Taxable Person in two situations:
- A supply of a digital currency itself. Recall that under Cabinet Decision No. 100 of 2024, the transfer of ownership and conversion of virtual assets is VAT-exempt, with retroactive effect from 1 January 2018. Exempt does not mean invisible: exempt supplies must still be disclosed in the VAT return and affect input tax apportionment — so a dirham value is still required, and this Directive now dictates how it is derived.
- A supply of goods or services where the consideration is received in digital currency. This is the commercially significant case. A growing number of UAE businesses — real estate brokers, luxury retailers, electronics traders, professional firms — accept payment in BTC, ETH, or stablecoins. These supplies remain fully taxable at 5% (or zero-rated/exempt on their own merits); only the payment medium is crypto. The output VAT must be computed on a dirham value, and that value must now come from the prescribed mechanism — a point vat consultants in Dubai are already flagging to crypto-accepting clients.
The prescribed mechanism: three platforms, one average, all year
Clause 2 sets out a three-step method:
Step 1 — Select three platforms. The Taxable Person selects three exchange platforms from the FTA’s published list of centralised public digital currency exchange platforms. The list currently comprises five entities:
| No. | Approved platform |
|---|---|
| 1 | Binance FZE |
| 2 | Bybit Fintech FZE |
| 3 | Deribit FZE |
| 4 | Bitget |
| 5 | Payward FZCO (the Kraken group’s UAE entity) |
Critically, the same three platforms must be used for all transactions in the same calendar year. This is an anti-cherry-picking rule: without it, a taxable person could select, transaction by transaction, whichever combination of platforms produced the lowest dirham value (minimising output VAT on sales) or the highest (maximising values where advantageous). The annual lock-in removes that optionality — so the selection made for the first crypto transaction of the year binds the business for the remainder of it, and should be made deliberately, not by default.
Step 2 — Average the three rates at the date and time of the trigger. The Taxable Person calculates the numerical (arithmetic) average of the exchange rates for the relevant digital currency as published by the three selected platforms, using the rates prevailing at the date and time of the supply, or the date and time the consideration is received, as the case may be. Two observations:
- The reference to time, not merely date, matters enormously for volatile assets. Bitcoin can move several percent intra-day; a daily closing rate is not compliant. Businesses need timestamped rate capture aligned to the tax point — which in turn requires clarity on which trigger applies under the ordinary date-of-supply rules (Articles 25 and 26 of the VAT Law): for advance payments in crypto, the receipt of consideration will typically set the tax point; for post-supply settlement, the supply itself.
- The averaging must be done per transaction, per currency. A business accepting BTC and USDT needs both rate sets from the same three platforms.
Step 3 — Convert using the average. The dirham value derived from the three-platform average is the value disclosed in the Tax Return.
Clause 3 adds a dedicated record-keeping obligation: the Taxable Person must retain evidence of the rates obtained from each of the three platforms — screenshots, API extracts, or platform statements — on top of ordinary VAT record-keeping for the supply. On an FTA audit, the auditor will expect to re-perform the average from retained evidence, not from a rate the business asserts.
Worked example
Facts. Al Noor Electronics Trading LLC, a Dubai mainland VAT-registered trader, sells computer hardware to a customer on 18 July 2026 at 10:00 (GST). The agreed consideration is 0.5 BTC, received at the time of supply. At the start of 2026, the company selected Binance FZE, Bybit Fintech FZE, and Payward FZCO as its three platforms for the calendar year.
Step 1 — capture the three rates at 18 July 2026, 10:00 GST (illustrative rates, consistent with BTC trading in the USD 63,000–64,000 range in mid-July 2026):
| Platform | BTC rate (USD equivalent) |
|---|---|
| Binance FZE | 63,562 |
| Bybit Fintech FZE | 63,610 |
| Payward FZCO | 63,487 |
Step 2 — numerical average:
(63,562 + 63,610 + 63,487) ÷ 3 = USD 63,553 per BTC
Converting the USD leg at the pegged rate of AED 3.6725/USD:
63,553 × 3.6725 = AED 233,398.39 per BTC
Step 3 — dirham value of the consideration:
0.5 BTC × 233,398.39 = AED 116,699.20
VAT computation. The consideration received (0.5 BTC) is treated as inclusive of VAT in the absence of contrary agreement (Article 38, VAT Law). Output VAT = 116,699.20 × 5/105 = AED 5,557.10, with a value of supply of AED 111,142.10 disclosed in Box 1 of the return. Al Noor retains timestamped rate evidence from all three platforms in its VAT file, a process many businesses set up with support from vat consultancy services in Dubai.
Had the contract stated the price as “0.5 BTC plus VAT”, the value of supply would be AED 116,699.20 and output VAT AED 5,834.96 — the drafting of crypto-denominated contracts now has a direct VAT cash cost, and businesses should review their standard terms accordingly.
The gaps the FTA has already acknowledged — and one it hasn’t
The Directive itself anticipates its own edge case: Clause 4 promises a public clarification for situations where a digital currency’s rate is not available on three platforms from the approved list. This will matter in practice — the five listed platforms have broad but not identical coin coverage, and less common tokens may trade on only one or two of them. Until that clarification issues, businesses receiving payment in thinly-listed tokens face genuine uncertainty and should document a reasonable, consistent approach.
A second gap is unaddressed: the fiat leg of the quote. The listed platforms predominantly publish rates against USD or USDT, not AED directly. Where no direct AED pair is published, a conversion of the USD leg is unavoidable — as in our example, using the Central Bank’s pegged rate of 3.6725. The Directive is silent on this step. Given the dollar peg the practical difference is negligible, but for audit-proofing, businesses should document the fiat-leg convention they apply and apply it consistently. For rates quoted against USDT rather than USD, the same question arises with a further (again, usually negligible) basis difference. We would expect the promised public clarification to address this.
A third practical point: Deribit FZE is principally a derivatives platform. Businesses selecting their three platforms should confirm that spot rates for their transacted currencies are actually published by each platform chosen — the calendar-year lock-in makes a poor selection expensive to live with.
What businesses should do now
Any UAE business that supplies digital currencies or accepts crypto as payment should, before its next VAT return: select and internally document its three platforms for calendar year 2026 (and diarise re-selection each January); build timestamped rate capture into the invoicing or POS process, ideally via platform APIs, so the evidence exists contemporaneously; align the capture timestamp with the correct tax point under the date-of-supply rules; review crypto-denominated contract terms for VAT-inclusive versus VAT-exclusive drafting; and file the rate evidence with the VAT records for the statutory retention period.
How TSAC can help
TSAC, among the tax advisory firms in Dubai active in this space, assists businesses with VAT treatment of virtual-asset transactions — from supply characterisation under Cabinet Decision No. 100 of 2024 and input tax apportionment for exempt digital-currency supplies, to implementing the three-platform conversion mechanism, documenting platform selection, and preparing for FTA audit. If your business touches digital currencies in any form, this Directive will apply to you upon its publication in the Official Gazette — and building the rate-capture and evidence process now, ahead of that date, is considerably easier than retrofitting it.
This publication is for general information only and does not constitute tax advice. At the date of writing, the Directive has not yet been published in the Official Gazette. Rates used in the worked example are illustrative. The Arabic text of the Directive prevails over any translation. Please contact TSAC for advice specific to your circumstances.