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Spain assesses VAT on Non-fungible token as electronic service

NFT classified as digital service and liable to 21% VAT

Agencia Estatal de Administración Tributaria, AEAT, has ruled that the supply of Non-fungible token is to be regarded as the supply of an electronic service and subject to the standard rate of 21%

The ruling was provided in a case involving an illustration on an online auction site where the right to the underlying digital assets was granted – but not the right of ownership of the digital asset. AEAT stated: NFTs are “digital certificates of authenticity” that, through blockchain technology, are linked to a unique digital file (i.e., NFTs are digital assets that cannot be mutually interchangeable).

AEAT has recognised two different digital assets:

  1. Underlying digital assets, which is the digital image or video etc
  2. Non-fungible token, digital ownership of certain rights over the underlying digital assets

AEAT considers the NFT as a  “digital certificate of authenticity”, so not a digital currency or physical good.

VAT place of supply on NFT’s

This does present a challenge for the seller who must be able to identify the place of supply by the identification of residency of the customer. Often on such platforms this is not provided by the platform. if the buyer resides in another EU Member Sate, the sale is subject to VAT in the EU Member State of consumption, unless the EUR10,000 threshold is not exceeded in a given year, and (iii) if the buyer resides outside the EU, the sale would fall out of the scope of Spanish VAT, unless the use and enjoyment rules are applicable.

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