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Non-Fungible Tokens an electronic service for VAT – EU VAT Committee

Review of EU VAT implications for NFT’s – suggests should be characterised as taxable electronic service

The European Commission’s VAT Committee has produced a review of the treatment of EU VAT for NFT’s. As a working paper, it aspires to clarify the fast-evolving NFT ecosystem, VAT rulings so far and potential points to debate to reach a common VAT practice across the EU.

This includes a range of possible VAT transactions or supplies, and if they are within the scope of VAT, and then if taxed or exempt:

  • Creating or minting NFT’s
  • Trading NFT’s
  • Earning NFT’s as a reward

The review concludes that NFT’s are electronic services, and so subject to VAT. Countries such as Spain and Belgium have already classified as a VAT’able electronic service – whereas cryptocurrencies are exempt. Norway has gone the same way.  New Zealand GST on NFT’s has also been confirmed. In the US, Washington state levied sales taxes on NFT‘s from 1 July 2022.

What are Non-Fungible Tokens?

There are no EU legal definitions of NFT’s. They are digital tokens of ownership or rights to access for a digital asset. In this sense, they are unique – hence non-fungible or interchangeable for another token. This could include: digital version of artwork; access to live events.

NFT’s are held on distributed ledgers, internet-connected nodes (e.g. connected computers). They are similar to cryptocurrencies, which are exchangeable (‘fungible’).

NFT’s constitute two parts:

  1. Identification code related to the token
  2. Metadata relating to the digital or physical asset – a name, description and, if appropriate, URL

They are created, or ‘minted’, which typically attracts a fee (‘gas fee’) for computation and storage. They are then typically held on-chain, on a digital ledger.  A popular, cheaper version is off-chain.

Electronic service?

NFT’s are digitally held technology, provided over the internet. This broadly fits the VAT Directive definition of an electronic service: Article 7(1) of the VAT Implementing Regulation10: ‘Electronically supplied services’ include services which are delivered over the Internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention, and impossible to ensure in the absence of information technology’.

How VATCalc can help get your NFT VAT right

VATCalc’s tax engine, VAT Calculator, can provide an instant live calculation tool for your NFT sales. And our VAT Auditor tool can help you validate the VAT you have been charged by your suppliers on their invoices.


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