VAT Treatment of Core Crypto Transactions in the System of EU VAT and Beyond

Transactions in virtual crypto assets challenge VAT systems that were designed for conventional business models. With a particular focus on the common system of EU VAT, this article examines the treatment of core crypto transactions involving payment tokens, NFTs and utility tokens. It argues that crypto assets cannot be classified generically for VAT purposes. Instead, their treatment depends on the technological design of the relevant blockchain mechanism and the economic function of the token. The analysis addresses VAT issues related to mining and staking, trading in primary and secondary markets, the use of tokens, and the services provided by portal and interface operators. It includes an assessment of deemed supplier regimes for crypto platforms, margin schemes, and a special regime for vouchers from a VAT law and policy perspective. The article further shows that crypto pseudonymity creates particular difficulties for applying the destination principle, determining the taxable amount, and enforcing VAT liabilities, and presents possible solutions. The article thereby identifies the key issues that need to be addressed by any VAT/GST system to ensure adequate, neutral and efficient taxation of crypto assets.