Spain: Tax Agency Clarifies VAT Treatment of the NFTs Granting Buyer Usage Rights

As part of its consulting services, the Spanish Tax Agency (TA) issued an answer on its website clarifying the VAT treatment of the non-fungible tokens (NFTs) granting the buyer usage rights. 

The question raised to the TA concerned the taxation of the sale of NFTs related to the illustrations transformed by Photoshop that constitute unique art pieces. These NFTs grant the buyer rights of use, but in no case the rights underlying the ownership of the work.

Taxability Rule

In its answer to the question, the TA explained that NFTs are digital certificates of authenticity associated with a single digital file through blockchain technology. These NFTs, as unique digital assets, cannot be replaced with each other since no two are the same. Their underlying asset can be anything that can be digitally represented as an image, a graphic, a video, music, or any other digital content. In conclusion, TA stated that the NFTs represent the digital ownership of the underlying digital file.

Reiterating the conclusion, the TA clarified that the object of the transaction connected to the question raised is the digital certificate of authenticity itself that represents the NFT, without the physical delivery of the image file or the digital file associated with it taking place. 

More precisely, the transaction's objects are photographs that are transformed by the artist using a computer program and that, due to the blockchain technology used, become unique and original digital assets since there is no other identical digital asset. Furthermore, the main part of the transaction is not the transmission of the digital file of the photograph itself but the digital certificate of authenticity that the NFT represents.

Therefore, digital art services realized in the sale of the NFT are classified as services provided electronically and taxed at the general rate of 21%.

Conclusion

When making their answer, the TA considered several legal acts, such as Article 11 and 70 Law 37/1992, of December 28, 1992, Binding Consultation of the DGT V 0486 - 22, of March 10, 2022, and ECJ judgment of 8 February 1990, Shipping and Forwarding Enterprise Safe BV, Case C-320/88.

With this answer, Spain's TA joins several others who provided clarifications and binding opinions regarding the VAT treatment of the NFTs.

Source: Tax Agency