VAT Treatment of Services Provided by Crypto Exchange Platforms

When bitcoin was invented in 2009, one of the main goals it set out to achieve was to allow online payments to be sent directly from one party to another without going through an intermediary. While virtual currencies 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 type of intermediary: crypto platforms.

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 crypto assets with legal currencies, 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 these platforms play in the crypto asset ecosystem, it is worth considering the value added tax when processing the services they provide.


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Crypto Exchanges as Secret Agents

From a VAT point of view, the online marketplaces are involved as intermediaries. They provide an infrastructure to connect sellers and buyers and receive compensation for this activity. The VAT law distinguishes between two types of agency relationships: disclosed and undisclosed agents.

An online marketplace is a certified agent when it trades in the name and on behalf of the seller. In this scenario, the seller is expected to sell directly to the customer. The seller must fabricate the VAT (if due) on the sale and issue a VAT invoice to the customer (if required by the billing rules). The marketplace receives a commission for its brokerage services, but is not a party to the sale.

An online marketplace is an unnamed agent when it trades in his own name but in the name of the seller. When an undeclared agent facilitates a sale, VAT law assumes that two transactions occur simultaneously: the seller supplies goods or services to the agent and the agent simultaneously resells them to the customer. Since the agent is expected to make a delivery to the customer, it is responsible for collecting VAT (if due) on that sale and for issuing a tax invoice (if required by billing regulations). The commission the secret agent earns is built into the selling price of the goods or services.

As it can be difficult in practice to determine whether an agent is acting in a declared capacity or not, the EU VAT Implementing Regulation provides a legal presumption that an operator of an online marketplace offering services rendered electronically is acting as an undisclosed agent, unless he specifies that another person is the provider and this is reflected in the contractual arrangements between the parties. There is also an additional rule that a Platform Operator who:

  • authorizes billing to the customer;
  • the authorized delivery of the service; we
  • establish the general terms and conditions of sale,

will always be presumed to be an unnamed agent and is not authorized to name any other person as supplier. This means that a platform operator that meets any of the stated conditions cannot 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 without information technology. The fact that certain crypto-assets can be accepted as financial instruments for the purposes of the application of VAT exemptions (see below) does not prevent them from being classified as electronically supplied services.

Since most crypto exchanges set the terms and conditions for transactions that they defer or allow at the expense of the customer, they come under the legal presumption that they are at risk as an undisclosed agent and there it will not be possible to refute. This means that a crypto exchange, acting as a confidentiality agent, is obliged to collect VAT (if due) on the sale and remit it to the tax authorities.

Is there an exemption?

Crypto exchanges don’t have to worry about potential tax collection obligations if the sales can benefit from a VAT exemption. However, it is not easy to answer the question whether a VAT exemption applies to a particular transaction.

In Skatteverket against David Hedqvist (Case C-264/14), the Court of Justice of the European Union ruled that a company that buys bitcoin units from third parties and resells them on its online trading platform is providing exempt services. While this decision involved a particular scenario (trading bitcoins for its own account), it created a misconception that all crypto asset sales were exempt from VAT. Even today many people quote Hedqvist judgment as the legal basis for the view that crypto trading does not involve tax liability.

This view is misguided because the court ruling only mentions payment tokens (virtual currency) – a type of crypto asset that tries to behave like money – and cannot apply to crypto tokens at the same time. Coins).

Another question is whether the court’s reasoning still applies under the current circumstances. In the Hedqvist decision, the court considered the original purpose of bitcoin, which would serve as a means of payment, and concluded that if bitcoin serves the same purpose as a national currency, it should be treated in the same way. The court ignored the fact that bitcoin was mainly used for speculative investment purposes by traders looking to take advantage of its price fluctuations. Now that it is clear that bitcoin is not used as a means of payment, it would be rather incoherent to say that bitcoin should be exempt from VAT for means of payment.

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

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

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

Since utility tokens are similar to traditional vouchers, the tax consequences of the sale of utility tokens depend on whether the place of supply of the goods or services assumes that the token relates and the VAT charged on those goods or services. services owed is known at the time of the token sale. If so, VAT will be charged on the sale of the utility token, which will be considered a single-use voucher. However, if the tax implications of a future exchange of goods or services for the token cannot be defined 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 usage .

Although there are not many official guidelines for NFTs, the Spanish and Belgian tax authorities have confirmed that they are not exempt. An online platform is therefore required to levy the customer’s country tax on the NFT sales it facilitates. This can be a difficult task if the platform does not collect 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 stated in one of its working papers that services “related to brokerage provided cannot be justified as exempt by bitcoin exchanges”. However, the working paper does not discuss the more common scenario – crypto exchange platforms acting as undisclosed agents – but addresses another situation where the platform is considered to be acting as an agent describing who is not directly involved in the transaction.

While this article is not intended to examine the VAT committee’s reasoning, it should be clarified that there is no blanket prohibition against applying VAT exemptions to crypto sales by unnamed agents.


Since VAT law considers most cryptocurrency exchanges not only as intermediaries facilitating crypto transactions, but as actual sellers of crypto assets, it is very important that exchanges are aware of their potential tax collection obligations. Given the large sales volume they reduce, not collecting VAT can get very expensive. While many types of digital tokens are exempt, some are subject to VAT. The sales that qualify for VAT exemption depend on the type of token being sold.

The views expressed in this article are those of the author and do not necessarily reflect the views of organizations to 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 their owners.

Author information

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

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