FTA Sets UAE Dirham Conversion Method for Digital Currency Transactions Under VAT

The Federal Tax Authority has introduced a standard method for converting the value of digital currencies into UAE dirhams for VAT reporting purposes.

Directive on Tax Transactions No. 3 of 2026 applies where a taxable person either supplies a digital currency or supplies goods or services for which payment is received in digital currency. The relevant digital-currency value must be converted into UAE dirhams for disclosure in the VAT return.

The Directive provides businesses with a uniform valuation mechanism for transactions where the consideration is denominated or received in digital currency rather than conventional fiat currency.

Under the Directive, the taxable person must select three exchange platforms from the list of centralised public digital currency exchange platforms published by the FTA. Once selected, the same three platforms must be used for all relevant transactions during that calendar year.

The FTA's initial approved list contains five platforms:

• Binance FZE

• Bybit Fintech FZE

• Deribit FZE

• Bitget

• Payward FZCO

Businesses therefore select three of these approved platforms and apply that selection consistently throughout the relevant calendar year.

For each relevant transaction, the business must obtain the exchange rate for the digital currency from its three selected platforms. It must then calculate the numerical average of those three exchange rates. The applicable rates are those prevailing at the:

• date and time of the supply; or

• date and time the consideration is received,

depending on which point is relevant to the particular transaction. The resulting average exchange rate is then used to convert the digital-currency value into UAE dirhams for VAT disclosure. This creates a specific methodology for digital currencies rather than leaving individual taxpayers to choose their own valuation source.

The Directive also imposes a record-keeping requirement. Taxable persons must retain records demonstrating the exchange rates obtained from each of the three selected platforms, in addition to the other records already required in connection with the underlying supply.

From a practical perspective, businesses accepting digital currencies may therefore need to retain evidence showing:

• the digital currency received;

• the transaction date and time;

• the exchange rate shown by each selected platform at that time;

• the calculated average exchange rate; and

• the resulting AED amount used for VAT reporting.

This documentation may become relevant if the valuation of a transaction is subsequently reviewed by the FTA.

The Directive also recognises that some digital currencies may not have an available exchange rate across three of the platforms included in the FTA's approved list. The FTA states that it will issue a separate public clarification explaining the procedure that taxpayers should follow where the relevant exchange rate is unavailable on three approved platforms.

Businesses dealing with less widely traded digital currencies should therefore monitor further FTA guidance rather than adopting an alternative conversion methodology independently.

The Directive establishes how the AED value must be calculated where the transaction has to be disclosed for VAT purposes. It does not, by itself, determine whether every digital-currency or virtual-asset transaction is taxable at 5%. The underlying VAT treatment still depends on the nature of the supply and the applicable UAE VAT legislation. The Directive specifically deals with the valuation mechanism for taxable persons making supplies involving digital currency.

Therefore, receiving payment in cryptocurrency does not automatically create a separate VAT liability. Businesses must first determine the VAT treatment of the underlying transaction and then apply the required conversion methodology where appropriate.

The new methodology has practical implications for companies accepting cryptocurrency or other qualifying digital currencies from customers. A business can no longer rely simply on the value displayed by a single exchange or use an internally selected conversion rate for VAT reporting where the Directive applies. Instead, the business must maintain a consistent three-platform methodology during the calendar year and preserve evidence supporting the calculation.

The FTA formally lists Directive No. 3 of 2026 within its VAT legislation and guidance framework.

NUR Advisory Note

Businesses accepting digital currency should incorporate the FTA conversion methodology into their accounting and VAT procedures rather than treating crypto payments as an informal alternative payment mechanism. Particular attention should be given to:

• selecting three FTA-approved platforms and documenting that selection;

• ensuring the same platforms are used consistently throughout the calendar year;

• recording the precise transaction date and time;

• retaining evidence of the three exchange rates used;

• calculating and documenting the average rate;

• converting the transaction value into AED correctly; and

• maintaining supporting records alongside the normal VAT documentation.

Accounting systems may also need to be reviewed where cryptocurrency payments are processed frequently. Manual conversion calculations across a high volume of transactions could create inconsistencies unless the valuation process is properly controlled.

Businesses should also distinguish between the payment method and the VAT treatment of the underlying supply. Receiving Bitcoin, stablecoins or another digital currency instead of AED does not by itself change whether the goods or services supplied are taxable, exempt or otherwise treated under UAE VAT rules.