Tokenized Assets, Digital Securities & VAT in the UAE: 2025 Recap and 2026 Outlook

Tokenization is no longer a concept piece in the UAE. By 2025, it became operational. Real estate is being fractionally owned through tokens. Funds are issuing digital units. Exchanges, brokers, custodians, NFT platforms, and Web3 protocols are now licensed, audited, and taxable.

At the same time, the UAE finally resolved a long-standing tax question:

How does VAT apply to virtual assets, digital securities, and tokenized structures?

The answer arrived through a combination of regulatory reform and tax clarification between late 2024 and early 2025.
The result: much less ambiguity, and much higher compliance expectations.

This article recaps what changed in 2025 – and explains what UAE businesses must prepare for in 2026.

What Do We Mean by Tokenized Assets and Digital Securities?

Before tax, comes classification.

In business terms:

Tokenized assets are blockchain-based representations of value or rights.
These can include tokenized real estate, tokenized funds, income-generating RWAs, or digital debt instruments.
Digital securities are tokens that represent traditional financial instruments – shares, bonds, fund units – issued and transferred on-chain under a regulated framework.
Virtual assets is the broader regulatory term used in UAE law.
It includes cryptocurrencies, exchange tokens, utility tokens, NFTs, and many tokenized structures.

For VAT purposes, the technology does not matter.
The economic substance does.

That principle sits at the heart of the UAE’s 2024–2025 VAT reforms.

2024-2025: From Grey Area to Defined VAT Treatment

The biggest shift came with Cabinet Decision No. 100 of 2024, effective 15 November 2024.

Article 42 – which governs financial services – was expanded to explicitly include virtual assets.

For the first time, UAE VAT law clearly stated that financial services now include:

Transferring ownership of virtual assets
Converting virtual assets
Keeping, managing, or enabling control of virtual assets

This amendment removed years of uncertainty around UAE VAT on virtual assets and VAT on crypto transactions UAE businesses had struggled to interpret.

Retroactive Application Back to 1 January 2018

One of the most consequential elements was retroactivity.

The transfer and conversion of virtual assets were treated as exempt financial services retroactively from 1 January 2018.

This matters because:

Many exchanges and brokers historically charged VAT conservatively.
Others treated crypto activity as outside scope without formal guidance.
Input VAT recovery calculations were often incorrect.

The change opened the door to historic reviews, corrections, and potential adjustments – both positive and negative.

VATP040: The Practical Rulebook Arrives (March 2025)

On 14 March 2025, the Federal Tax Authority issued Public Clarification VATP040.

This document mattered more than the regulation itself.

It explained, in operational terms:

Which virtual asset activities are exempt, taxable, or zero-rated
How to treat fees, spreads, commissions, and composite supplies
How partial exemption must be recalculated
How tax invoices and records should be maintained

For finance teams, this was the moment theory met reality.

ERP systems, wallet records, and accounting policies suddenly needed alignment.

Accounting and ERP Impact: The Hidden Cost of Clarity

VATP040 made one thing clear: VAT compliance in Web3 cannot live in spreadsheets.

Finance teams now need to:

Re-map on-chain and off-chain transaction flows
Separate exempt virtual asset transfers from taxable service fees
Re-code VAT treatments at the token and transaction level
Align VAT logic with IFRS classification

This is where UAE blockchain accounting rules moved from optional to essential.

The 2026 Angle: From Clarity to Enforcement

2025 gave the UAE its rulebook.

2026 is about execution.

Expect:

Deeper FTA audits focused on virtual asset businesses
Scrutiny of partial exemption calculations
Requests for historic transaction reviews back to 2018
Questions around token classification and documentation

For CFOs and founders, the risk is no longer uncertainty. It is getting the classification wrong.

2025 Regulatory Milestones Beyond VAT

VAT reform did not happen in isolation. It aligned with wider regulatory consolidation across the UAE.

VAT: Virtual Assets Now Sit Inside Financial Services

Under the revised UAE VAT Article 42 amendments, financial services now explicitly cover:

Virtual asset transfers
Virtual asset conversions
Keeping and managing virtual assets
Enabling control over virtual assets

But exemption is not automatic.

The exemption depends on how value is earned.

If revenue comes from:

A bid–ask spread
Counterparty trading
Embedded pricing

The service may be exempt.

If revenue comes from:

An explicit fee
A commission
A custody or platform charge

The service is generally standard-rated at 5%.

This distinction is central to Digital securities VAT treatment and Financial services exemption virtual assets analysis.

VARA: Dubai’s Virtual Asset Regime Matures

Dubai’s Virtual Assets Regulatory Authority (VARA) became fully operational in 2025.

Key developments:

VARA confirmed its role as the sole regulator for virtual assets in Dubai (outside DIFC)
The Virtual Assets and Related Activities Regulations formed the baseline framework
The Marketing Regulations 2024 tightened disclosure and risk communication
Updated activity-based rulebooks and a refreshed Trading Rulebook followed in 2025

In May 2025, VARA formally recognised Asset-Referenced Virtual Assets (ARVAs) – a major step for tokenized RWAs and fractional ownership structures. This development directly impacts Tokenized assets VAT UAE analysis, especially for real estate and income-linked tokens.

ADGM: Digital Asset Framework Refinement

Abu Dhabi Global Market continued its steady, institutional approach.

In June 2025, ADGM’s FSRA issued updated guidance covering:

Trading facilities
Custody
Stablecoins
NFTs
Market infrastructure

The changes streamlined licensing, adjusted capital requirements, and made ADGM more attractive to institutional players.

ADGM also opened consultations on staking, a topic with unresolved tax implications heading into 2026.

Together, these reforms strengthened the ADGM digital asset framework and set the stage for deeper tax analysis of yield, rewards, and DeFi structures.

Federal and DIFC Context

At the federal level:

The SCA retains oversight of securities and certain tokenized instruments
DIFC and the DFSA continue to operate a parallel digital asset regime

For VAT, however, the Federal Tax Authority remains the final authority, regardless of licensing jurisdiction.

By the end of 2025, the UAE had achieved something rare: Regulatory alignment across tax, financial services, and virtual asset supervision. But clarity creates responsibility.

How Tokenized Assets and Digital Securities Fit into the New UAE VAT Rules

One of the most important lessons from 2025 is simple: VAT treatment follows what the token represents, not how advanced the blockchain is.

For UAE VAT on virtual assets, most activity falls into four practical buckets.

Payment and Exchange Tokens

(Cryptocurrencies and Similar Assets)

Examples include Bitcoin, Ethereum, and exchange-based tokens used primarily for value transfer or trading.

For VAT purposes:

Transfers and conversions of these tokens are treated as financial services
They are generally VAT-exempt, following the UAE VAT Article 42 amendments
This exemption applies retroactively from 1 January 2018

However:

Trading fees or commissions charged by exchanges or brokers are standard-rated (5%) when the place of supply is the UAE

This distinction is central to VAT on crypto transactions UAE and Partial exemption virtual asset businesses

Digital Securities and Investment Tokens

These tokens represent:

Shares
Debt instruments
Fund units
Structured investment products

They are closer to traditional securities than crypto.

VAT treatment generally aligns with financial instruments:

Issuance and transfer often qualify as exempt financial services
Platform, advisory, structuring, or administration fees are usually taxable

This is where Digital securities VAT treatment overlaps heavily with capital markets regulation.

The mistake many firms make is assuming “regulated” means “VAT-free.”
It does not.

Tokenized Real-World Assets (RWAs)

This is the fastest-growing and riskiest category.

Examples include:

Tokenized real estate
Revenue-linked tokens
Fractional ownership structures
Asset-Referenced Virtual Assets (ARVAs) under VARA

Here, VAT depends entirely on legal structuring.

If the token grants:

A direct interest in UAE real estate, real estate VAT rules may apply
- Zero-rated first supply of qualifying residential property
- Standard-rated commercial property
A financial exposure to income or value, VAT may align closer to exempt financial services

This tension sits at the core of VAT on tokenized real estate UAE – and will remain a major advisory issue in 2026.

Documentation matters more than marketing language.

Utility Tokens and NFTs

NFTs are not automatically exempt.

If an NFT provides:

Digital content
Access to platforms
In-game items
Membership or rights

It is often treated as an electronic service.

That typically means:

Standard-rated VAT (5%) when supplied to UAE customers
Place of supply rules apply like other digital services

This is a key area under VAT treatment of NFTs UAE, and one where enforcement is expected to increase.

Core VAT Treatment After Article 42: What Changed in Practice

The revised Article 42 clarified what qualifies as a financial service, but it also narrowed assumptions.

Virtual Asset Transfers and Conversions

These are generally:

Exempt financial services

Unless:

They represent an underlying taxable supply
They qualify as zero-rated cross-border financial services (non-resident customer, no UAE use)

The difference between exempt and zero-rated matters deeply for input VAT recovery.

Keeping and Managing Virtual Assets

This was a major 2024–2025 change.

From 15 November 2024:

Keeping, managing, or enabling control of virtual assets is treated as a financial service

But exemption applies only if:

No explicit fee or commission is charged

If a custodian, wallet provider, or platform charges a clear fee:

The service is generally standard-rated

This distinction directly impacts Virtual asset custodian VAT rules.

Practical VAT Scenarios: What This Looks Like in Real Life

Example 1: Centralised Exchange or Broker in the UAE

Activities include:

Crypto-to-crypto trades
Fiat-to-crypto conversions

VAT impact:

The transfer/conversion itself is generally exempt
Trading fees or commissions charged to customers are standard-rated (5%)

Key risk:

Reduced input VAT recovery due to increased exempt revenue
Misapplied partial exemption ratios

This is one of the most common audit triggers under FTA VAT guidance virtual assets.

Example 2: Tokenization Platform (Real Estate or Funds)

Typical revenue streams:

Token issuance fees
Platform onboarding fees
Smart contract deployment fees

VAT treatment:

These services are usually standard-rated if supplied in the UAE
The token itself may be exempt or follow real estate VAT rules, depending on structure

This creates mixed supplies and complex apportionment.

Product-by-product VAT mapping is no longer optional.

Example 3: Custody and Wallet Providers

If the service involves:

Safekeeping assets
Enabling control
No explicit fee

It may qualify as an exempt financial service (from 15 Nov 2024).

If the service includes:

Monthly custody fees
Asset-based charges

It is generally taxable.

This distinction directly affects UAE blockchain accounting rules and pricing models.

Example 4: NFTs and Gaming Tokens

If NFTs deliver:

Digital art
Content access
In-game functionality

They are often treated as:

Standard-rated electronic services

VAT applies based on customer location, not blockchain location.

Blockchain-Based Accounting Design: VAT and IFRS Must Align

By 2026, tax authorities will expect accounting systems to match tax logic.

Mapping Tokens to IFRS

Most UAE firms now use a hybrid approach:

IFRS 9: Digital securities, tokenized debt, investment tokens
IAS 38: Own crypto holdings
IFRS 15: Platform fees, issuance revenue, staking as services

This classification directly affects Tokenization accounting standards UAE and VAT treatment.

If accounting says “financial instrument” but VAT treats it as a digital service, problems follow.

On-Chain and Off-Chain Ledger Design

A 2026-ready setup includes:

Separate ledgers for client assets and house assets
Wallet-level transaction tagging
Journal entries capturing:
- Token type
- Counterparty nature
- Jurisdiction
- VAT category

Dedicated VAT codes are essential, including:

Exempt VA transfers
Taxable fee-based VA services
Zero-rated cross-border financial services
Standard-rated NFTs and digital services

This is the backbone of Blockchain-based ERP integration.

Smart Contracts and the VAT Time of Supply

Smart contracts automate:

Token issuance
Distributions
Staking rewards
Protocol fees

Each trigger may create:

A VAT tax point
A revenue recognition event

Finance teams must map smart contract logic to:

UAE VAT time-of-supply rules
Continuous supply principles
IFRS 15 performance obligations

Ignoring this creates silent exposure.

Audit Trail and FTA Readiness

By 2026, FTA audits involving blockchain will expect:

Off-chain evidence:

Legal opinions
Classification memos
Contracts and engagement letters
Customer residency documentation

On-chain evidence:

Wallet transaction histories
Reconciliations to ERP
Blockchain analytics reports

This is becoming standard for Blockchain audit trail UAE requirements.

2025 Lessons: Where UAE Businesses Are Getting VAT Wrong

By the end of 2025, the rules were no longer the problem. Execution was. Across exchanges, tokenization platforms, custodians, and Web3 groups, several patterns emerged during reviews and early audits.

Misclassification of Tokens and Services

The most common error was treating all token movements as exempt virtual asset transfers.

In reality:

Exempt VA transfers
Taxable platform fees
NFT-based digital services
Real-estate-linked supplies

often exist inside the same transaction flow.

This misclassification risk is now central to Virtual asset VAT risks UAE and UAE Web3 regulatory compliance.

Tokenized real estate structures are especially exposed.
Marketing language often promises “fractional ownership,” while legal documents quietly create something else.

VAT follows the documents – not the pitch deck.

Weak Partial Exemption Calculations

The expansion of Article 42 increased exempt revenue across the sector.

Many businesses failed to update:

Pro-rata methods
Input VAT attribution logic
Recovery assumptions baked into pricing

This matters because:

Exempt VA flows reduce recoverable input VAT
Zero-rated cross-border services preserve recovery
Treating one as the other distorts tax outcomes

This is now a priority area under Partial exemption virtual asset businesses and FTA VAT guidance virtual assets.

ERP and Wallet Integration Gaps

Many firms still rely on:

Manual exports from exchanges
Wallet screenshots
Excel-based VAT tagging

These approaches fail under audit.

Common gaps include:

No FX policy for token valuation at tax point
No approved VAT control framework
No management-level sign-off on token classification

By 2026, these gaps will be interpreted as control failures – not growing pains.

2026 Outlook: What UAE Firms Should Expect Next

The direction is clear. The question is pace, not intent.

More Detailed FTA Guidance and Enforcement

Based on 2025 trends, further clarification is likely in areas such as:

VAT on DeFi and staking UAE
NFTs linked to memberships, royalties, or access rights
Complex RWA tokenization and income-based ARVAs

More importantly, expect targeted audits.

Groups most exposed:

Exchanges and brokers with high exempt turnover
Tokenization platforms earning mixed revenue
Custodians offering fee-based safekeeping
Groups with offshore wallets and cross-border flows

The FTA is no longer asking what crypto is.
It is asking how you accounted for it.

ADGM, VARA, and International Alignment

Regulatory momentum continues.

ADGM is expected to refine staking, yield, and fiat-referenced token rules following its 2025 consultations
VARA will continue tightening disclosure, retail protections, and ARVA governance as Dubai scales its Web3 strategy
Alignment with the OECD’s Crypto-Asset Reporting Framework (CARF) will increase data sharing and transparency

This will directly affect Virtual asset regulations UAE 2026 and reporting expectations for VASPs.

Market Developments Driving VAT Complexity

Expect growth in:

Tokenized real estate and income-linked RWAs
Institutional custody and trading under VARA and ADGM licences
Hybrid products combining tokens, smart contracts, and traditional assets

Each layer adds VAT complexity. The market is maturing and so is enforcement.

Action Plan for 2026: How UAE Businesses Can Future-Proof VAT and Blockchain Accounting

The difference between compliance and exposure in 2026 will come down to preparation.

Step 1: Token and Business Model Diagnostic

Start with a full inventory:

Token types: payment, security, utility, NFT, ARVA, RWA, stablecoins
Business roles: exchange, broker, custodian, issuer, protocol, investor

This diagnostic underpins UAE VAT on virtual assets and Tokenized assets VAT UAE analysis.

Step 2: VAT Mapping and Policy Paper

For each transaction flow, document:

VAT treatment (exempt, standard-rated, zero-rated, outside scope)
Place of supply
Input VAT attribution

The outcome should be a formal VAT policy paper – signed off by management and ready for FTA review. This is no longer optional.

Step 3: ERP, Wallet, and Control Enhancements

A 2026-ready setup includes:

Wallet-to-ERP integration
Dedicated VAT codes reflecting post-Article 42 logic
Automated partial exemption calculations

This supports Blockchain-based ERP integration and audit defensibility.

Step 4: Historic Review and Corrections (2018–2025)

Businesses should reassess:

Virtual asset transfers and conversions back to 1 January 2018
Custody and management services from 15 November 2024

The goal is not perfection – it is defensible correction.

Voluntary disclosures are often cheaper than enforced ones.

Step 5: Governance, Training, and Monitoring

Leading firms are now establishing:

Internal VA tax and accounting committees
Cross-functional training for finance, legal, and tech teams
Continuous monitoring of FTA, VARA, ADGM, and OECD developments

Governance will increasingly be treated as evidence of intent.

Conclusion

The UAE has done something few jurisdictions have achieved. By 2025, it aligned:

VAT law
Financial services regulation
Virtual asset supervision

Article 42, VATP040, VARA, and ADGM frameworks now provide a clear baseline for UAE crypto tax updates 2026 and beyond.

But clarity raises expectations.

In 2026, success will not come from knowing the rules.
It will come from implementing them properly.

For CFOs and founders, this means:

Correct token classification
Ledger redesign that reflects economic reality
VAT compliance across on-chain and off-chain activity

Those who treat VAT as an afterthought will struggle. Those who integrate tax, accounting, and blockchain design will scale faster and safer.

A Note for UAE Businesses

At TaxADEPTS, we see this shift clearly.

2026 will reward firms that combine:

VAT and corporate tax expertise
Transfer pricing awareness
Blockchain-ready accounting design

A structured Tokenization & VAT Readiness Review is no longer a defensive exercise. It is a strategic one.

FAQs:

What is the difference between a virtual asset and a tokenized real-world asset (RWA) for UAE VAT purposes?

VAT depends on what the token represents. RWAs referencing real estate or income streams may follow property or financial-service rules rather than generic virtual-asset treatment.

Can UAE businesses recover input VAT on blockchain development costs?

Often yes — but recovery depends on whether output supplies are taxable, zero-rated, or exempt.

How is place of supply determined for blockchain transactions?

It follows customer location and contractual arrangements, not node or wallet location.

Do smart-contract payments create VAT tax points?

Yes, where they trigger consideration or performance obligations under UAE VAT rules.

Are gas fees subject to VAT?

Generally treated as third-party costs, but treatment depends on structure and documentation.

How should virtual assets be valued for VAT?

Using a consistent, documented FX policy at the tax point.

Does custody without token movement create a VATable service?

Yes, if an explicit fee is charged.