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: is an asset or a right transferred for consideration? Then there is a capital gain or loss. Is a service provided —the creation or the minting? Then 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 included in the savings base.

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 that often goes unnoticed: if the ETH used in the purchase had appreciated relative to its own acquisition cost, that purchase of the NFT with ETH also constitutes a barter, which could in turn generate a gain on the ETH given up.

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.

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; in transactions with traders or professionals, the analysis shifts to the rules applicable to dealings between taxable persons. Anyone who creates and sells NFTs directly must check who bears the charging of the tax, because the marketplace does not always handle it.