Evolving technologies: VAT, cryptoassets and the metaverse

Developments in the variety and ingenuity of digital asset transactions have far outpaced the guidance that can be provided by tax authorities or courts on their VAT treatment. However, a number of non-UK rulings provide some insight into the VAT characterisation of transactions concerning digital assets such as cryptocurrencies and non-fungible tokens (NFTs). A decision of the German Federal Tax Court also provides guidance on the VAT treatment of transactions taking place in a virtual world. Each case emphasises the importance for VAT practitioners of digging beneath the technical terminology surrounding the transaction to identify the legal rights arising and real-world economic consequences.