FTA Issues VAT Rules for Digital Currency Conversion into AED

The Federal Tax Authority (FTA) issued Directive on Tax Transaction No. 3 (2026) explaining the method of converting the digital currency value into Emirati Dirham (AED) for VAT purposes.

A taxable person who makes the payment or receives the payment in digital currency (Bitcoin, Ethereum, or any other cryptocurrency) is required to convert the value of the currency into Emirati Dirham for disclosure in their VAT Returns.

The tax authority has introduced the 3-step digital currency conversion method for Value Added Tax (VAT) returns. 

Step 1: Select 3 Currency Exchange Platforms

A taxable person has to select three digital currency exchange platforms from the list of “centralized public digital currency exchange platforms” published by the tax authority, on the condition that the person will use the selected three currency exchanges for all transactions throughout a calendar year, meaning the business cannot switch the platform other than the selected ones. 

The following are the FTA’s listed cryptocurrency exchange rate platforms

• Binance FZE
• Payward FZCO
• Bybit Fintech FZE
• Bitget
• and Deribit FZE

Step 2: Calculate the Numerical Average

Find the exact exchange rate of the cryptocurrency to AED prevailing at the exact date and time of the transaction.

For example, at the time of transaction, the prevailing crypto-exchange rates on three platforms are as follows;

• Binance FZE BTC 1= AED 225,000
• Payward FZCO BTC 1= AED 224,000
• Deribit FZE BTC 1= AED 226,000

Then compute the Average value of the crypto-exchange rates across all transactions published by the three selected exchange platforms.

Average Exchange Rate: 225,000+224,000+226,000/3 = 225,000

 Step 3: Convert into AED

Convert the value of cryptocurrency into AED using the numerical average computed in step-2.

For example, the taxpayer received 2 bitcoins for their services, which is equal to 450,000 AED.

This conversion is essential for the proper accounting of cryptocurrency transactions because the prices of digital currencies are volatile and differ across the crypto-exchange platforms. The authority administers this rule so taxpayers can’t cherry-pick the (lowest or highest) exchange rate on the given date.

In addition to maintaining the other records of the supply, the taxable person is required to retain the record of the exchange rates of all three platforms as proof. The documentation will be helpful while filing the VAT return and internal audit of the taxable person. Further, the directive also elucidates that the tax authority will release a public clarification indicating the procedure to follow when the crypto exchange rate is not available on the 3 platforms chosen from the FTA’s published list.

 Also Read: How Different Countries Tax Cryptocurrency