October 10, 2022
The cryptocurrency payment tokens and their VAT status have been in a grey area for a while. Currently, the crypto community is discussing the obligations traders and marketplaces in the UK have regarding VAT.
An answer is awaited from the UK tax authority, the HMRC, if the Non-Fungible Tokens or NFTs that certify the ownership of digital assets are subject to VAT.
Cryptocurrencies, the most frequently used crypto asset, is VAT-exempt in the UK, arguing that currencies like Bitcoin are used as means of payment and have no intrinsic value. Therefore, their sales, classified as financial services, should be VAT-exempt. However, in the HMRC Cryptoassets Manual, published in 2021, the topic of the NFT has not been covered.
Some people hope that NFTs will be VAT-exempt. However, NFTs, unlike digital currencies, give access to different types of digital files and should be considered digital services, making them subject to VAT in the UK. If so, sellers and NFT marketplaces will become obliged to register as taxpayers and begin collecting VAT once the threshold of £85,000 in the last 12 months is reached.
In the EU, VAT on cryptocurrency tokens is currently being reviewed, with countries like Belgium or Spain already issuing their decisions on NFT taxation. In addition, other countries like New Zealand have already begun publishing their decisions on the question.