As digital currencies continue to gain acceptance in commercial transactions. The Federal Tax Authority has introduced new VAT reporting requirements through Directive on Tax Transactions No. 3 of 2026, published on July 17, 2026. The Directive prescribes the methodology for determining the UAE Dirham(AED) value of digital currency transactions for VAT purposes. It applies where a taxable person supplies digital currency or receives digital currency as consideration for a supply of goods or services, requiring the value of transactions to be determined in UAE AED for VAT reporting
The new measure aims to strengthen UAE VAT compliance while providing a uniform framework for the VAT treatment of converting digital currency transactions into UAE Dirhams(AED).
If your business accepts digital currency as consideration for taxable supplies or makes payments using digital currencies, now is the time to review your VAT reporting, tax invoicing and record-keeping requirements to ensure compliance with the latest UAE FTA regulations.
What does UAE FTA Directive No. 3 of 2026 Mean?
The Federal Tax Authority’s Directive on Tax Transaction No. 3 of 2026 set out rules for determining the Dirhams(AED) value of digital currency transactions when determining the value of taxable supplies under UAE VAT regulations. The Directive establishes a standardized and consistent methodology for valuing digital currency transactions, helping businesses improve VAT reporting accuracy, while helping taxable persons maintain compliance with the UAE VAT regulations.
Key Compliance Highlights
- Determine the UAE AED value of digital currency transactions using the methodology prescribed under FTA Directive No. 3 of 2026.
- Calculate the AED value using the arithmetic average of the exchange rate published by three FTA-approved centralized public digital currency exchange platforms
- Ensure the same three selected exchange rate methodology is applied consistently across all VAT reporting periods during a calendar year.
- Retain supporting VAT documentation evidencing the exchange rate used for each transaction.
- Ensure VAT returns accurately reflect the converted UAE AED value.
This prescribed methodology applies where a taxable person supplies digital currency or receives digital currency as consideration for the supply of goods or services, requiring the value of the transaction to be determined in UAE Dirhams (AED) for VAT purposes.
Why does this UAE VAT update matter?
With the growing adoption of digital currencies in the UAE, businesses need a consistent approach to UAE VAT reporting. FTA Directive N. 3 of 2026 introduces a prescribed methodology for determining the UAE Dirhams (AED) value of digital currency transactions for VAT reporting. This provides greater consistency in UAE VAT accuracy while helping businesses comply with the latest UAE VAT regulations.
The Directive guidance is important for businesses involved in:
- Businesses accepting digital currency as consideration for goods or services
- Digital asset service providers
- E-commerce businesses
- FinTech companies and technology-driven businesses
- Businesses engaged in cross-border digital transactions
Methods for converting digital currency into UAE Dirhams(AED)
Under FTA Directive on Tax Transactions No 3 of 2026, a taxable person must follow the prescribed methodology when converting digital currency into UAE Dirhams(AED) for VAT requirements.
- Choose three FTA -approved exchange platforms: The UAE AED value must be determined using the arithmetic average of the exchange rates published by three centralized public digital currency exchange platforms included in the list published by the UAE FTA. Once selected, the same three platforms must be used consistently throughout the relevant calendar year.
- Calculate the arithmetic average exchange rate: The taxable person must calculate the arithmetic average of the exchange rates published by the three selected platforms. The exchange rates used should be those prevailing at the date and time of the supply or, where applicable, the date and time the consideration is received, in accordance with the UAE VAT rules.
- Convert the digital currency into UAE Dirham(AED): The value of the digital currency transactions must then be determined in UAE Dirham(AED) using the arithmetic average exchange rate obtained from the three selected platforms.
- Retain supporting documents: Taxable persons are required to keep sufficient records evidencing the exchange rates used to determine the AED value of each digital currency transaction for UAE VAT compliance purposes.
UAE FTA Approved Digital Currency Exchange Platforms
Under FTA Directive No. 3 of 2026, the FTA has published a list of approved centralized public digital currency exchange platforms to be used when determining the UAE Dirham(AED) value of digital currency transactions for UAE VAT purposes:
The approved exchange platforms currently include:
- Binance FZE
- Bybit Fintech FZE
- Derbit FZE
- Bitget
- Payward FZCO
The FTA may update the list of approved centralized public digital currency platforms from time to time. Taxable persons should refer to the latest FTA publications before applying the prescribed methodology to ensure ongoing UAE VAT compliance.
What if the required digital currency is not listed on the approved exchange platform?
Where the exchange rate for a digital currency is unavailable on the FTA-approved centralized public digital currency exchange platforms, businesses should refer to the FTA’s forthcoming Public Clarification, which will outline the prescribed procedure for determining the UAE Dirham (AED) value of such digital currency for VAT purposes.
Best practises for UAE VAT compliance on digital currency transactions
To ensure smooth VAT compliance, businesses should establish a clear internal approach for recording, valuing and reporting digital currency transactions in adherence to the latest UAE FTA requirements.
Key areas to address include:
- Selecting and consistently using the same three FTA-approved centralized public digital currency exchange platforms throughout the calendar year.
- Identifying the relevant date and time of the supply or receipt of consideration for determining the applicable exchange rates.
- Collecting and retaining sufficient evidence for the exchange rates used.
- Calculating and documenting the arithmetic average of exchange rates from the three selected platforms.
- Recording the converted UAE AED value in the accounting records
- Reconciliation of digital currency receipts with invoices and VAT return and accounting records.
- Maintaining complete documentation to support VAT compliance and future FTA reviews.
Avoid Common UAE VAT Compliance Mistakes
To minimize VAT compliance risk, businesses should avoid:
- Using exchange rates from only one exchange platform
- Changing the selected exchange platforms during the calendar year
- Applying exchange rates that do not correspond to the relevant date and time of the transaction
- Failing to keep sufficient evidence supporting conversion methodology.
Jaxa Chartered Accountants, a leading VAT consultant in Dubai and FTA-approved tax agent in the UAE, assists businesses with UAE VAT compliance, corporate tax, accounting and audit services across the UAE.
Key takeaways for Businesses
Businesses involved in digital currency transactions should:
- Review existing UAE VAT compliance procedures for digital currency transactions
- Apply the FTA-prescribed methodology for converting digital currencies into UAE Dirhams (AED)
- Use the same FTA-approved centralized public digital currency exchange platforms consistently throughout the calendar year.
- Calculate the AED value using the arithmetic average of the exchange rate from the three selected platforms at the relevant transaction date and time.
- Maintain complete supporting documentation, including the exchange rates used, transaction timestamps, arithmetic average calculation, and resulting AED value to support VAT reporting.
- Review and update the accounting system, VAT processes, and internal controls to ensure compliance with UAE FTA Directive No. 3 of 2026.
- Strengthen internal control to support accurate VAT reporting and facilitate future FTA reviews and audits.
- Seek professional VAT advisory in Dubai where digital currency transactions are complex.
Why this Update is Important
The introduction of FTA Directive No. 3 of 2026 marks an important development in the UAE VAT framework for digital currency transactions. Businesses should proactively review their VAT compliance procedures, implement the prescribed methodology for determining the AED value of digital currency transactions, and retain sufficient supporting documentation to ensure accurate VAT reporting and minimize compliance risks.
Jaxa Auditors, a best VAT consultant in the UAE, can help
Keeping up with the latest UAE VAT regulations and FTA directives requires both technical expertise and practical implementation. As a best UAE FTA tax agent as well as UAE VAT consultant with 19 years of industrial experience, Jaxa Chartered Accountants helps businesses manage VAT compliance for digital currency transactions with confidence.
Our tax professionals assist businesses with UAE VAT and corporate advisory, along with accounting, bookkeeping, and audit services. Our team helps businesses stay compliant with the latest FTA updates.
As an FTA-approved Tax agent, Jaxa can assist with:
- UAE VAT advisory on digital currency transactions
- VAT return filing and submission
- UAE VAT health check
- Review VAT compliance and transaction documentation
- UAE corporate tax implementation
- UAE VAT and Corporate tax registration
- Strengthening accounting system and internal controls
- Corporate tax and accounting support for businesses using digital currencies
Our experienced tax experts help businesses interpret the latest UAE FTA directives and implement practical solutions to ensure accurate VAT reporting and long-term compliance.
Stay compliant with UAE VAT update 2026.
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