Taxation aspects of Non Fungible Tokens (NFTs) on art

NFT Taxation aspects

Non Fungible Tokens (“NFTs”) are in the conceptual category of valueless tokens, i.e. those cryptographic mathematical units whose function is exhausted in their ownership and have no other utility than their “uniqueness”.

Non-fungibility therefore allows the tokens to be distinguishable from one another, and thus each token is different from one another.

The first form of NFTs was the CryptoPunks protocol, although the protocol later became successful with the CryptoKitties project.

The current development of applications for NFTs is an interesting frontier, generating a number of explorations and experiments, which are now in the first implementation phase.

The use of NFTs allows for the creation of unique works of art, something that was not possible until now in the digital world, with the consequence that digital works could be easily copied without being able to distinguish one from the other.

The possibility of inserting a particular piece of information makes that work non-fungible, unique and transferable.

NFTs, the taxation aspects to be considered

From a fiscal point of view, questions arise regarding the transfer and circulation of NFT. 

In each case, a distinction can be made:


  • NFT issuance in conjunction with the work


1.1. Physical work

1.2. Digital work

1.3. Coincidence between NFT and work


  • NFT issuance separated from the work


2.1. Physical work

2.2. Digital work


  • Circulation of the NFT


3.1. Circulation of the combined NFT work

3.2. Circulation of the separate NFT operation

3.3. Resale right

The first aspect to be cleared is that the transfer for consideration constitutes “income” for the normal value received, irrespective of whether one receives euros or cryptocurrency.

The second aspect is what constitutes an NFT related to a work of art.

On first analysis NFTs can be distinguished:

  1. if issued by the artist together with the work, it constitutes the “signature” and the uniqueness of the work.
  2. if issued after the work, it constitutes a certificate of authenticity, which can be issued by the artist (or his/her heirs) or by the art gallery.

It is clear that, for the first time, the traceability of the work to the artist can be inextricably linked to the work itself, without the need for experts to guarantee its uniqueness or originality; consequently, thanks to the non-fungibility, the holder (the one who has the availability) of the token has exclusivity.

The transfer of the NFT may take place either in conjunction with what it represents or separately, with the additional opportunity of being able to programme the token for copyright management.

There are two relevant steps:

  1. The issuance of the NFT, considered as “minting”, i.e. the production “from scratch” of a token with a cost equal to the amount of cryptocurrency used for its creation.

In the first transfer, the tax watershed consists in the presence of the requirement of intellectual property, understood as the presence of creativity and infungibility. In this case, the joint transfer of the work and the NFT constitutes a transfer of the rights relating to the original work (copyright), with the consequent exclusion from VAT (except in special cases) and inclusion in the income of self-employed persons with special rules for the determination of income.

In the case of the supply of the NFT separate from the work, it is assimilated to a normal service (issue of the certificate of authenticity).

  1. Subsequent assignments of the NFT in the three forms: combined, separated and with resale right.

The royalties sold are subject to VAT if the activity is carried out on a regular basis, while the royalties received for the resale rights received by the artist remain outside the VAT field since the author is not part of the relationship between the seller and the buyer.

The person who buys and sells works of art, from a general point of view, can be included in three different figures:

  1. The “art dealer”: the person who, professionally and habitually, carries out an activity aimed at trading in works of art, with consequent attraction to business income as a dealer;
  2. The “occasional speculator”: a person who is motivated by a lucrative purpose and who occasionally purchases works of art for the purpose of a subsequent sale thereof, without being a regular businessman, with the configuration of miscellaneous income (occasional business income);
  3. The ” private collector “: who, motivated more by a cultural spirit, buys works of art to increase his collection and enjoy the beauty of the works purchased and any proceeds with positive differentials remain outside the taxation since they are not “speculative”.

The three figures are overlapping, resulting in uncertainty for those operating in this market.

As with all technological innovations, there is a great deal of uncertainty regarding the interpretation of the instruments and it is necessary to look into issues and cases in order to allow a harmonious development through appropriate legal constructions.

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