Tax Evasion Using the Sale of Virtual Asset Losses with Application to Corporate and Business Tax in the United Arab Emirates

Prof. Tarek Abdel Salam

https://doi.org/10.62271/pjc.16.4.1397.1406

Abstract

This paper examines the challenges of applying UAE Corporate Tax Law to virtual assets, comparing it with Egyptian tax legislation. In the UAE, losses can be deducted from profits across different periods, with specific rules for carrying losses forward but not backward. Taxpayers listed on recognized stock exchanges are exempt from certain loss carryforward restrictions. Egyptian law, on the other hand, allows loss deductions and carryforwards for up to five years without limitations on the deduction percentage, but losses cannot be offset across different income sources. Applying UAE tax provisions to virtual assets is complex. The need for both parties to be resident entities complicates determining the residency of virtual assets. Additionally, calculating taxable income for virtual assets is difficult, especially with a 75% deduction limit on taxable income. The exemption for listed taxpayers further complicates the situation. To address these issues, it’s recommended to exclude virtual asset losses from deductions and carryforwards due to difficulties in determining their value and verifying conditions. Also, the exemption for listed taxpayers should be removed. A more specific approach to taxing virtual assets is needed for a fair and consistent tax system.

Keywords:  Tax Law, virtual assets, loss carryforward, tax exemptions, UAE and Egyptian laws.