NFTs: buying, selling and creating (IRPF and VAT)

An NFT (non-fungible token) is a token on a blockchain that certifies ownership of a unique digital asset: a digital artwork, a video, a video-game item, a domain or any other tokenised asset. For tax purposes, what matters is not the technical format, but the economic nature of the transaction. Two questions order the analysis. If an asset or a right is transferred for consideration, there is a capital gain or loss. If what exists is the provision of a service (the creation or the minting), the income may be classified as income from an economic activity or as investment income, depending on the context.

The buyer-investor: capital gain or loss

For the person who acquires NFTs as an investment asset and later sells them, the regime is identical to that of any other crypto-asset: the difference between the transfer value and the acquisition value —including the associated expenses, such as minting fees (gas) and marketplace fees— is a capital gain or loss which, because it derives from the transfer of an asset, is included in the savings base (Article 46.b LIRPF), in line with the criterion the DGT has been applying to crypto-assets and has reiterated in later rulings.

Example. A digital-art NFT is acquired for 2 ETH (€3,200) and 0.02 ETH (€32) is paid in network fees. The acquisition value is €3,232. If it is later sold for 5 ETH (€8,500), with a marketplace fee of 2.5% (€212.50), the net transfer value is €8,287.50 and the gain, €5,055.50. It is worth noting a nuance: if the ETH used in the purchase had appreciated relative to its own acquisition cost, that purchase of the NFT with ETH is also a barter, which could in turn generate a gain on the ETH given up. Recall that this gain is quantified under the barter rule of Article 37.1.h LIRPF: as the difference between the acquisition value of the ETH given up and the higher of two amounts, their market value or that of the NFT received (a criterion the DGT maintains in ruling V0999-18).

The creator: economic activity or capital gain?

If the taxpayer is the creator of the NFT, the key for IRPF is not a formal label, but whether or not there is a self-employed ordering of means of production or human resources. In many cases of repeated creation and marketing, with continuity and profit motive, the natural fit will be an economic activity, with taxation in the general base and deductibility of the related expenses. In purely isolated transactions with no structure, the classification may be open to debate.

In any event, the temptation of automatic rules should be resisted. It is not accurate to reduce the question to the rule “occasional equals capital gain; habitual equals economic activity”: what is decisive is the organisation of means, which must be assessed case by case.

Secondary-market royalties

Many NFTs incorporate automatic royalties: when a third party resells the work on the secondary market, the creator receives a percentage of the price. Their classification must be analysed in the light of the contract and the economic context of the project. Where the royalties are the continuation of an organised exploitation of the NFT or the digital work, the economic-activity thesis gains strength; in more passive cases, the debate remains open. For the buyer who resells, by contrast, the royalty paid is a transfer cost that reduces their capital gain.

VAT: the NFT as an electronically supplied service

For VAT, the available doctrine on NFTs draws on rulings such as V0486-22, V2274-22 and V1753-23, in which the DGT has treated certain NFTs linked to digital content —or to rights to use and exploit that content— as services supplied electronically.

It is worth specifying the difference from cryptocurrencies. The latter are treated as equivalent to a currency operating as a means of payment, and their transfer is exempt from VAT (in line with the CJEU judgment of 22 October 2015, Hedqvist, C-264/14, ex Article 135(1)(e) of Directive 2006/112/EC). The NFT, by contrast, lacks that financial nature and does not function as a means of payment; hence the DGT takes the view that its sale is a transaction that is subject to VAT and not exempt, taxed at the standard rate of 21%.

The practical consequence lies in the place-of-supply rules, which depend on the type of recipient. In sales to final consumers, regard must be had to their location and to the possible use of the One-Stop Shop (OSS) regime for the VAT accruing in other Member States, although, below the combined annual threshold of €10,000 under Article 73 LIVA (intra-EU distance sales and electronic services to EU private individuals), the transaction is located at origin and Spanish VAT is charged at 21%; only once it is exceeded does taxation shift to the consumer’s State, with the OSS as the channel for compliance. In intra-EU B2B transactions, by contrast, the service is located at the recipient’s place of business (Article 69(One)(1) LIVA) and the reverse charge applies —it is the recipient who self-assesses the VAT in their own country—: the supplier does not charge Spanish VAT. Anyone who creates and sells NFTs directly must check who is responsible for charging the tax, because the marketplace does not always handle it.