VAT Treatment of Services Provided by Crypto Exchange Platforms

When bitcoin was invented in 2009, one of the main goals it sought to achieve was to allow online payments to be sent directly from one party to another without going through an intermediary. Although virtual currency and other crypto-assets can be traded without relying on traditional intermediaries, such as banks and other financial institutions, the crypto industry has created a powerful new breed of intermediaries: trading platforms. crypto exchange.

Crypto exchanges are online marketplaces where you can buy and sell crypto-assets. You can use them to exchange one type of crypto token for another or to buy cryptoassets using legal currency, such as Euros or US Dollars. According to CoinMarketCap, as of July 27, 2022, there were 295 active crypto exchanges with a total 24-hour trading volume of $354.12 billion. Given the important role that these exchanges play in the crypto-asset ecosystem, it is interesting to consider the value added tax of processing the services they provide.


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Crypto Exchanges as Undisclosed Agents

From a VAT perspective, online marketplaces act as agents. They provide an infrastructure to connect sellers and buyers, and receive some compensation for this activity. VAT law distinguishes between two types of agency relationships: disclosed and undisclosed agents.

An online marketplace is a declared agent if it acts in the name and on behalf of the seller. In this scenario, the seller is deemed to sell directly to the customer. The seller must charge VAT (if due) on the sale and issue a VAT invoice to the customer (if required by the invoicing rules). The marketplace receives a commission for its intermediation services but is not a party to the sale.

An online marketplace is an undisclosed agent if it acts in his own name but on behalf of the seller. When an undeclared agent facilitates a sale, VAT law assumes that two transactions take place at the same time: the seller provides goods or services to the agent and the agent resells them simultaneously to the customer. Since the agent is considered to be making a supply to the customer, he is responsible for collecting VAT (if due) on that sale and issuing a tax invoice (if required by the billing regulations). The commission the undisclosed agent earns is built into the selling price of the goods or services.

Since it can be difficult to determine in practice whether an agent is acting in a declared capacity or not, the EU VAT Implementing Regulation establishes a legal presumption that an online marketplace operator who provides services delivered electronically is acting as an undeclared agent unless it explicitly names another person as the provider and this is reflected in the contractual agreements between the parties. There is also an additional rule that a Platform Operator who:

  • authorizes billing to the customer;
  • authorizes the provision of the service; Where
  • sets the general conditions of sale,

will always be presumed to be an undisclosed agent and is not authorized to list another person as a supplier. This means that a platform operator fulfilling one of the aforementioned conditions is not allowed to reverse the legal presumption and claim that another party is acting as a seller.

Crypto-assets meet the definition of electronically delivered services because they can be delivered over the Internet with minimal human intervention and their transfers are not possible in the absence of information technology. The fact that certain crypto-assets may be considered as financial instruments for the purposes of applying VAT exemptions (see below) does not prevent their qualification as services provided electronically.

Whereas most crypto exchanges set the terms and conditions of the transactions they facilitate or allow at the customer’s expense, they will be covered by the legal presumption that they are acting as an undisclosed agent and there it will not be possible to refute it. This means that a crypto exchange, acting as an undisclosed agent, will be required to collect VAT (if due) on the sale and remit it to the tax authorities.

Does an exemption apply?

Crypto exchanges do not need to worry about possible tax collection obligations if the sales they facilitate can qualify for VAT exemption. However, it is not easy to answer the question whether a VAT exemption applies to a particular transaction.

In Skatteverket v David Hedqvist (Case C-264/14), the Court of Justice of the European Union ruled that a business buying bitcoin units from third parties and reselling them on its online trading platform is performing exempt services. Although this decision concerned a particular scenario (trade in bitcoins on own account), it created a misconception that all sales of crypto-assets were exempt from VAT. Even today, many people cite Hedqvist judgment as providing a legal basis for the view that crypto trading does not incur any tax liability.

This view is wrong because the court ruling only mentions payment tokens (virtual currency) – a type of crypto-asset that seeks to act like money – and cannot apply to crypto tokens with different characteristics. (NFT, security tokens or utility tokens).

Another question is whether the court’s reasoning is still valid in the current circumstances. In the Hedqvist decision, the court considered the original purpose of bitcoin, which was to function as a means of payment, and concluded that if bitcoin serves the same purpose as national currencies, it should be treated the same. The court ignored the fact that bitcoin was primarily used for speculative investment purposes by traders seeking to profit from its price swings. As it is now clear that bitcoin is not used as a means of payment, it would be rather incoherent to argue that bitcoin should benefit from VAT exemption for means of payment.

The question of whether sales of cryptoassets facilitated by crypto exchanges are exempt from VAT cannot be answered in a single way. It depends on the type of token sold (payment token, security token, utility token, NFT or hybrid token).

If the only purpose of the token is to serve as a means of payment, the VAT exemption for transactions involving legal tender coins and banknotes can be applied (in accordance with the Hedqvist judgement).

A security token that is similar to traditional transferable securities can benefit from the exemption for transactions in financial instruments (stocks, bonds and other transferable securities).

Since utility tokens are similar to traditional vouchers, the tax consequences of selling utility tokens will depend on whether the place of supply of the goods or services to which the token relates and the VAT due on those goods or services are known. at the time of the token sale. If so, VAT should be charged on the sale of the utility token, which is considered a single-use voucher. However, if the tax consequences of a future exchange of goods or services for the token cannot be determined at the time of the sale of the token, the sale is outside the scope of VAT because the token is assumed to be a good for multiple uses.

Although there is not much official guidance on NFTs, the Spanish and Belgian tax authorities have confirmed that they are not exempt. An online platform is therefore required to levy the tax of the customer’s country on the NFT sales it facilitates. This can be a difficult task if the platform does not collect any location data about its users.

There may be some confusion about the application of VAT exemptions to services provided by crypto exchanges, as the European Commission’s VAT Committee has indicated in one of its working documents that services “related to intermediation provided by Bitcoin exchanges could not be considered exempt”. The working paper, however, does not discuss the more common scenario – crypto exchange platforms acting as undisclosed agents – but does address a different situation where the platform is considered to be acting as as a disclosed agent who is not directly involved in the transaction.

While this article is not intended to examine the reasoning of the VAT Committee, it should be clarified that there is no blanket prohibition on applying VAT exemptions to crypto sales by undisclosed agents. .


Since VAT legislation considers most cryptocurrency exchanges to be not just intermediaries facilitating crypto transactions, but actual sellers of crypto-assets, it is very important that exchanges are aware of their potential tax collection obligations. Given the large volume of sales they facilitate, not collecting VAT can become very costly. Although many types of digital tokens are exempt, some are subject to VAT. Which sales qualify for VAT exemption depends on the type of token being sold.

The opinions expressed in this article are those of the author and do not necessarily reflect the views of organizations with which the author is affiliated.

This article does not necessarily reflect the views of the Bureau of National Affairs, Inc., publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Aleksandra Bal is Head of Indirect Tax Technology and Operations at Stripe.

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VAT Treatment of Services Provided by Crypto Exchange Platforms

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