A German court has issued a landmark ruling concerning the value-added tax (VAT) treatment of Non-Fungible Token (NFT) sales. The Lower Saxony Finance Court announced the decision on Wednesday.
The case centered around a trader who conducted NFT transactions via a platform in 2021, believing these transactions to be exempt from VAT. However, the court rejected this position, confirming that the transactions constitute “other services” as defined under § 3 Abs. 9 of the German VAT Act (UStG).
Judges determined that the pseudonymized crypto wallet addresses of purchasers do not preclude the application of VAT. As the plaintiff had failed to fulfill their duty of care requirements and the precise proportion of domestic sales was indeterminable, the court estimated taxable revenue at half of the total income earned. The court also found no basis for a tax exemption or a structural enforcement deficiency.
Delivered by the 5th Senate, the ruling is legally binding, although an appeal to the Federal Finance Court has been permitted. This is understood to be the first decision by a German finance court regarding the VAT implications of NFT transactions and could serve as a significant precedent for the taxation of digital assets.
