Due to the anonymity of non-fungible tokens’ (“NFTs”) transactions, sellers face practical difficulties in determining whether or not they should charge Spanish Value Added Tax (“VAT”) to the buyers on sales through online platforms. This fact has lead the Spanish Tax Authorities (“STA”) to conclude in a recent ruling that an online marketplace which facilities the sale of NFTs in exchange for a fee shall be deemed to act in its own name on the sale of NFTs to the final purchaser, and therefore it is liable for collecting Spanish VAT from the buyers. In practice this new ruling changes the previous criterion of the STA regarding the marketplace liability in the sale of NFTs and, in our view, involves that online marketplaces shall obtain information to confirm whether the relevant purchaser is acting or not as entrepreneur for VAT purposes and the place where the buyer is based.
In March 2022 the STA issued a ruling with reference number V0486-22 analysing the VAT treatment of the sale of NFTs in Spain through online platforms (we refer to our note “First Spanish ruling on the VAT treatment of the sale of NFTs”). In such ruling the STA did not mention anything regarding the VAT implications of these sales for the marketplaces. However, the STA have recently issued a second ruling, with reference number V2274-22, dated on 27 October 2022, which analyses the VAT treatment of the sale of NFTs in Spain with a very similar (almost identical) fact pattern to the previous ruling, in which the STA take a different approach with regards to the VAT impact of these transactions for online platforms. According to the STA, the new ruling “qualifies and complements” the previous ruling.
According to the facts mentioned in the ruling, the taxpayer is an individual who creates illustrations and sells them as NFTs on an electronic marketplace.
The marketplace merely intermediates in the sale of NFTs and does not have any ownership right over the NFTs.
Spanish VAT treatment on sales of NFTs: Marketplace liability
Following the previous ruling, the STA confirm that the sale of NFTs should be considered as “electronically supplied services” for VAT purposes.
However, in most of the sales of NFTs, sellers are not provided with any personal information of the purchasers, who only identify themselves before the digital platforms acting as intermediaries. Thus, sellers face practical difficulties in determining whether or not they should charge Spanish VAT to the buyers.
These circumstances have lead the STA to change its previous interpretation and conclude that, pursuant to Article 9a of the Council Implementing Regulation (EU) No 282/2011 (“VAT Implementing Regulation”) (9bis according to the Spanish drafting), an online marketplace which facilities the sale of NFTs in exchange for a fee shall be deemed to act in its own name on the sale of NFTs to the final purchaser, and therefore it is liable for collecting Spanish VAT from the buyers.
In this regard, we note that Article 9a establishes that the above presumption can only be rebutted if the seller is explicitly indicated as the supplier by the online platform and that is reflected in the contractual arrangements between the parties, being required that (a) the invoice issued or made available by each taxable person taking part in the supply (i.e. the seller) identifies the transaction and the supplier thereof; and (b) the bill or receipt issued or made available to the customer (i.e. the buyer of the NFT) identifies the transaction and the supplier thereof. This presumption cannot be rebutted if a taxable person (i.e. the online intermediary) sets the general terms and conditions of the supply.
The STA understands that the presumption is applicable to this particular situation where the seller cannot have access to the relevant information of the buyer (due to anonymity of NFTs transactions) in order to be able to fulfil its obligations as VAT taxpayer.
As a consequence of the above, the STA take the view that there are two sales of NFTs for VAT purposes, both of which are characterized as “electronically supplied services”, i.e.:
- First transaction: Sale of NFTs by the owner/seller to the digital platform, which is acting as entrepreneur for VAT purposes: This supply is only subject to Spanish VAT at the general VAT rate (i.e., 21%) if the digital platform is established in Spain.
- Second transaction: Sale of NFTs by the digital platform to the buyer, which may be either acting as an entrepreneur or not: This supply will generally be taxed in Spain if the buyer is established/resides in Spain. We refer to our note “First Spanish ruling on the VAT treatment of the sale of NFTs” for a full analysis of the place of supply of electronically supplied services and for EU-wide VAT registration scheme (except for the fact that with effects as of 1 January 2023 the use and enjoyment rule is no longer applicable to electronically supplied services).
Pursuant to this new ruling, online platforms are obliged to collect Spanish VAT from the buyers, and therefore they are required to (i) identify if the purchaser is acting as entrepreneur for VAT purposes or not, and (ii) determine the place where the buyer is based.
Finally, the STA emphasizes, for information purposes, that Spanish and EU legislation provide record-keeping obligations for digital platforms and online marketplaces (regardless of the application of the presumption described herein) with reference to the transactions carried through them.
This ruling regarding the VAT treatment of the online sale of NFTs changes the role of digital platforms in the supply chain and are deemed to be making the sale of NFTs to the final purchaser in their own name.
Therefore, online intermediaries are liable for collecting the VAT from buyers in the sales of NFTs through their marketplaces and digital platforms.
Besides, we note that this ruling is based on the application of Article 9a of VAT Implementing Regulation, which is currently being analysed by the Court of Justice of the European Union in case C-695-20 (Fenix International Limited).
Digital platforms should carefully analyse the VAT implications derived from their intermediation in the sale of NFTs and other digital assets and gather from the buyers enough information in order to be able to determine whether the transaction is subject to VAT in Spain and, where appropriate, collect it from the buyer.