How are your NFTs taxed?

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What is Kylian Mbappé worth? On the NFT marketthings are clear: the value of the French football star soars. A crazy buyer (or savvy investor) has become the owner of a unique copy of the PSG player, in the form of an NFT, for the modest sum of 416,493 euros. The transaction took place this week on the Sorare platform, which has created a system for collecting and exchanging virtual stickers of football players, a kind of Panini 3.0 collection.

NFTs (non-fungible tokens or non-fungible tokens) are digital ownership certificates. They attest to the ownership of a work or a virtual object. Like bitcoin, they use blockchain technology. Today, these digital assets are at the center of a real speculative fever. According to a study by online broker HelloSafe, the global NFT market is worth $16 billion.

This frenzy did not escape the tax authorities. What tax sauce will your NFT investments eat? My Money goes around the question.

Is the capital gain taxed?

If you make a good deal on the resale of your NFTs, do you have to pay capital gains tax? The tax authorities consider that the rules in this area are the same as those applicable to other types of virtual assets, such as cryptocurrencies. Three cases must be distinguished.

21%

VAT is due on sales of NFT. If the seller is a Belgian taxable person and he sells his NFT to a Belgian resident, the tax is 21%.

  1. Normal management of private assets. A taxpayer who carries out a limited number of transactions, without taking too many risks, is considered a investor acting as a good father. In this case, the capital gain is not taxed. “The rule is the same as for the taxpayer who trades: his capital gains on shares are also exempt”, points out Denis-Emmanuel Philippe, associate lawyer at Bloom Law.
  2. speculative management. A taxpayer who realizes a high number of operations may be considered by the tax authorities as a speculator. This is the case if the investor buys and resells many NFTs, in very short periods of time. “We then enter a gray area,” said Denis-Emmanuel Philippe. There is no fixed scale in terms of the number of operations or their frequency. The speculative aspect of the taxpayer’s activities will therefore be assessed case by case. If the tax authorities put him in this speculative category, the taxpayer will be taxed as “miscellaneous income”, up to 33%.
  3. Professional management. This is the case of the taxpayer who makes the resale of NFT his main activity or who sets up a professional management of his portfolio of NFT. “We are talking about an NFT trader. It’s an extreme case“, underlines Denis-Emmanuel Philippe (Bloom Law). The capital gains are then considered as professional income, taxation can reach 50%.

Is VAT due on the sale of NFT?



“Until now, nobody imagined that VAT was due on the sale of an NFT. It’s a mini-shake for investors.”

Denis Emmanuel Philippe

Partner at Bloom Law

For VAT administration, an NFT is considered “a digital collectible or digital art object“. This was recently answered by the Minister of Finance, Vincent Van Peteghem, to a parliamentary question. The consequence is that the sale of an NFT is subject to VAT. “It’s a mini-shock for investors. Until now, no one imagined that VAT was due on this type of transaction”, evokes Denis-Emmanuel Philippe.

Attention : only a seller subject to VAT will have to pay said tax. An occasional investorwho carries out one or other isolated transaction, is not a taxable person and therefore does not have to pay VAT.

On the other hand, an investor who carries out repeated transactions or who sells NFTs as part of his professional activity must pay VAT. If he sells an NFT to a buyer established in Belgium, the tax is 21%. If the buyer is based abroad, the amount of the tax depends on the tax system of the State in question.

Will your heirs pay inheritance tax?

The answer is yes. As long as they have a certain value, NFTs are assets that must be mentioned in the declaration of inheritance. They will therefore be subject to inheritance tax.



“The risk of detection of NFTs by the tax authorities will increase.”

Denis Emmanuel Philippe

Partner at Bloom Law

Failure to declare may be sanctioned. “The risk of detection of NFTs by the tax authorities will increase”, warns Denis-Emmanuel Philippe. A new European directive in preparation (DAC 8) plans to extend the information exchange mechanisms in the field of cryptocurrencies and toincrease transparency on transactions involving NFTs.

The summary

  • NFTs, these certificates of digital property, are at the center of a speculative fever.
  • The crazy sums exchanged on the market have attracted the attention of the tax authorities.
  • Capital gains tax, VAT, inheritance tax: NFTs will not escape taxation.

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How are your NFTs taxed?


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