Taxation of Virtual Assets: Updates from Germany and UAE

In the fast-moving world of virtual assets, keeping pace with evolving tax rules is crucial. This week, we’re diving into the latest taxation news from Germany and the UAE, two key jurisdictions in the crypto‑regulatory universe. Let’s see what’s changed – and what it means for businesses and investors.

Germany: Clarity Through Wisdom of the Finance Ministry

On 6 March 2025, Germany’s Federal Ministry of Finance issued a sweeping update titled “Einzelfragen zur ertragsteuerrechtlichen Behandlung bestimmter Kryptowerte” – basically, a detailed circular on income‑tax treatment of crypto-assets 

What’s New?

1. Broader “Crypto‑Assets” Term
   The term “virtual currencies and other tokens” has been replaced with the more inclusive “crypto-assets”, acknowledging the diversity in digital asset types.
   
2. Staking Gets Categorized
   For the first time, German tax law draws a line between active and passive staking – making tax obligations clearer depending on how you participate in block creation.
   
3. DeFi Enters the Spotlight
   Income derived from decentralized finance (DeFi) is now explicitly addressed. That means lending, liquidity‑providing, staking, yield farming – these all have tax implications.
   
4. Flexible Valuation Rules
   Germany now accepts daily market rates when valuing crypto for tax purposes – offering flexibility instead of rigid timestamped valuations.
   
5. Record-Keeping & Reporting Demands
   Taxpayers must maintain detailed transaction overviews and be ready for scrutiny. The circular emphasizes cooperation and documentation.
   

Income Tax Highlights

• Holding > 1 Year: Capital gains are fully tax-free.
  
• Holding < 1 Year: Gains fall under income tax (0–45%) plus possibly 5.5% solidarity surcharge. However, gains below €1,000 annually are tax-exempt.
  
• Crypto Earnings: Income from mining, staking, node operation, or airdrops may fall under:
  
  • Business income (if you’re running a business),
  • Other non-commercial income (private, below €256/year is exempt),
  • Private sales (if you held crypto less than a year).

What This Means

These changes signal a modern, engaged, and crypto-friendly approach. Germany is acknowledging tech trends like DeFi and staking while emphasizing good record-keeping.

• Long-term investors benefit: Holding for over a year offers tax-free gains.
• Active DeFi users need awareness: Staking, lending, NFTs, node operation – all count as income.
• Businesses and individuals need transparent tracking systems, daily valuations, and regular transaction logs.

UAE: VAT Exemptions and Corporate Tax Clarity

The United Arab Emirates (UAE) is known for its welcoming tax environment. Now, it’s adding VAT clarity and corporate tax context around virtual assets.

VAT Public Clarification (Early 2025)

In early 2025, the UAE Federal Tax Authority (FTA) issued VATP040, a public clarification on VAT for virtual assets, building on its late-2024 decree.

Key points:

1. Virtual Assets Defined: Digital representations of tradeable value, excluding fiat and securities.
   
2. VAT Exemptions (backdated to 1 January 2018):
   
   • Transfers and conversions of virtual assets
   • Custody and management, but only if no fee or commission is charged.
     
3. Zero-Rated Services: Services to recipients outside the UAE may be zero-rated, but proving the location of recipients – especially anonymous crypto users – can be tricky.
   
4. Barter Treatment: Payment in crypto may be treated similarly to barter, which can trigger unintended tax effects.
   
5. Input VAT Exclusion: Any VAT paid on exempt supplies cannot be reclaimed. Businesses must track exempt vs taxable virtual asset transactions.
   

Corporate Tax (Since June 2023)

The UAE also introduced a 9% corporate tax for entities with profits over AED 375,000  – including crypto-related businesses.

• Free Zone companies can still benefit from exemptions if they comply with regulatory requirements.
  
• Crypto businesses must carefully track income and costs to determine the taxable base under the 9% rate.

Implications

• VAT clarity is welcomed, but practical complexities remain around recipient verification, barter, and input tax recovery.
  
• Crypto firms must build robust systems that:
  
  • Classify transactions (exempt vs taxable),
  • Calculate VAT, and
  • Track input tax reconciliation.
    
• Corporate tax means crypto startups need clear profit-processing workflows.

Comparative Snapshot

Tips for Crypto Participants

In Germany:

1. Hold crypto for over 1 year for tax-free gains.
2. Track staking, mining, NFT, DeFi income meticulously.
3. Keep clear daily valuation records and transaction logs.
4. Plan tax returns thoughtfully to leverage the €1,000 short-term gains exemption and €256 passive income floor.

In the UAE:

1. Ensure VAT compliance – differentiate taxable vs exempt virtual asset activities.
2. Decide if services to overseas crypto users require zero-rating and how to verify them.
3. Monitor input VAT exposure; exempt supplies block VAT reclamation.
4. For entities, calculate corporate tax obligations, especially profit‑tracking and allowance zones.

Final Thought 

Germany and the UAE are both actively refining digital‑asset taxation. Germany offers a tax-savvy framework for long-term investors and is grappling with DeFi and staking reality. The UAE, meanwhile, offers VAT relief and a low‑tax corporate environment – but it requires strong compliance discipline.

For investors, professionals, and businesses, the message is clear: stay informed, maintain disciplined record-keeping, and design tax systems that adapt to evolving rules.At Cryptoverse Legal Consultancy , we help you interpret these developments and translate them into smarter tax strategies – whether you’re in Berlin or Dubai. Reach out if you’d like tailored advice.