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Crypto-assets and VAT: Tips for walking on ice

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The Portuguese tax authorities have issued several advance rulings on the VAT treatment of crypto-assets

Diogo Ortigão Ramos, Daniel S de Bobos-Radu and João Pedro Russo of Cuatrecasas present the current Portuguese VAT framework for crypto-assets and approach several tax issues that may impact crypto businesses.

As Alan A Tait would put it apropos the VAT treatment of financial services, “trying to get to grips with crypto-assets is akin to trying to get your hands around a piece of jelly”: it slips away all the time. The more the crypto-asset business booms all over the world – Portugal being no exception, on account of an attractive, yet unintended, direct taxation regime – the more the tax treatment is raising awareness to potential risks regarding the uncertainty of the law and administrative practices.

The Portuguese tax authorities have issued several advance rulings on the VAT treatment of crypto-assets. In 2018, they took the view that, as long as a ‘utility token’ serves as a means of payment, its sale must be exempt in line with the national provision corresponding to Article 135(1)(e) of the EU VAT Directive (EVD).

In 2019, the tax authorities confirmed that the same exemption was applicable to the exchange of cryptocurrencies for legal tender and vice versa. Moreover, they reminded that the determination of the status of the customer must follow Articles 17 and 18 of the VAT Implementing Regulation: apart from the rules concerning non-EU customers, a supplier may regard a customer established within the EU as a non-taxable person when he can demonstrate that the customer has not communicated his individual VAT identification number.

Afterwards, the tax authorities understood (although without a clear justification) that the very same exemption corresponding to Article 135(1)(e) of the EVD can also be applicable to crypto-mining activities.

What about acte clair?

Like the Portuguese authorities, other tax authorities in the EU have been following the Court of Justice of the European Union (ECJ) decision in Hedqvist (C-264/14). The question arises as to the scope and extent of this case according to the acte clair doctrine. 

Does Hedqvist cover a sufficiently wide scope of topics to the extent EU VAT law is so obvious that there is no room “for any reasonable doubt as to the manner in which the question raised is to be resolved”? If not, it seems that tax authorities may be using a ‘conceptual melting pot’ to assign a uniform treatment to all categories of crypto-assets, securing administrative efficiency.

Advance rulings expire whenever there is a change to the (legal) circumstances that led to their issue. Since the ECJ is the only true interpreter of EU VAT law, the ever-evolving crypto-market faces a considerable degree of uncertainty that can neither be addressed by member states (lack of competence), by the VAT Committee (non-binding), nor by other legislation proposals such as MiCA Regulation and DAC8 (given the autonomy of the EU VAT legal system). Indeed, it is apparent that the evolution of the VAT framework underlying crypto-assets should be living and dying on the sole effort of the ECJ.

Contributions in kind?

Since the tax authorities are treating crypto-asset business as VAT exempt, a question that may be raised regards the VAT treatment of a transfer of intangible assets (e.g. intellectual property) by an individual taxable person to a crypto-asset company by means of a contribution in kind. 

Would it be out of scope under a KapHag (C-442/01) approach? If so, assuming that the individual partner has deducted input VAT, would the (exempt) company receive VAT-free intangible assets? Or should the open market value be ascertained since they are related parties? What if the intangible assets qualify as a transfer of a going concern under Article 29 of the EVD? Given the high amounts usually at stake, these questions must be addressed together with a careful analysis of the status, capacity, and deduction power of the parties involved.

Composite supplies?

One of the most relevant topics pertains to the (normative) qualification of crypto-assets for VAT purposes – which is necessarily different from their taxonomy as a descriptive approach. 

Understanding the principal element of a supply or ascertaining what would be artificial to split in the absence of an average customer is not an easy task. Perhaps dealing in tokens that are more than means of payment may constitute a barter transaction, which leads to other relevant questions about determining the taxable amount.

Place of supply issues may also arise if the predominant element is an electronic service, as well as taxable event problems if utility tokens are in fact vouchers exchangeable for other services or goods. In an ultra-volatile and delocalised market such as the crypto-asset one, the quest for coherence is one of the main challenges of the internal market.


It is expected that a consistent answer from the EU legislature on VAT treatment of crypto-assets will only come after a stabilised regulatory framework. Moreover, since the anonymity underlying the blockchain fosters the risk of carousel fraud, it is likely that all EU member states adopt a cooperative strategy (harmonisation or uniform application), spearheaded by the ECJ, rather than an individual one (sovereignty).

Considering the mismatch in direct tax treatment of crypto assets within the EU jurisdictions, it will be interesting to see whether the ECJ-driven VAT harmonisation momentum and the efforts made on the applicable regulatory framework have the collateral effect of bringing players to the table, in search of some level of harmonisation in the direct tax treatment of crypto-assets within the EU. Until then, Portugal appears to have, for once and in this respect, a rather good hand to deal with.

Meanwhile, the potential VAT impact on crypto-asset businesses must be assessed in each individual case under existing case law and considering the general principles underlying the common system of EU VAT. In any case, the competence of the ECJ must be safeguarded.


Diogo Ortigão Ramos

Partner, Cuatrecasas



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