Crypto-assets take many forms, and their legal characteristics and consequent tax and other regulatory classifications require a case-by-case analysis. Tokens are digital assets that represent a unit of value or utility, and they are often used as a means of exchange within a particular ecosystem or platform. They can be used for a variety of purposes, such as accessing features or services, participating in governance processes, or even as a form of investment.

We can distinguish between many different tokens, such as: currency tokens, utility token, equity token, securities token, currency token, asset token, non-fungible token and should treat them accordingly depending on their nature.

Currency tokens are digital assets that enable access to a particular ecosystem or platform. They are used to facilitate transactions and interactions within the ecosystem, and can often be traded on cryptocurrency exchanges. Examples of currency tokens include Ether (ETH), which is used to power the Ethereum blockchain, and XRP, which is used to facilitate transactions on the Ripple network.

Equity tokens, on the other hand, represent ownership in a company or other real-world asset. They are similar to traditional stocks or shares, but are issued and traded using blockchain technology. Equity tokens can offer investors the opportunity to invest in early-stage startups or other high-potential ventures, and can also provide greater liquidity compared to traditional investments.

Security tokens represent an ownership stake in an asset, typically a company (virtual shares) or a credit relationship (related to virtual shares or debt instruments), and give its holders a share of the expected resulting income. Security tokens are digital assets that represent ownership in a real-world asset, such as stocks, bonds, or real estate. They are similar to traditional securities, but are issued and traded using blockchain technology.

Asset tokens, on the other hand, represent ownership in a digital or physical asset. These assets can include things like cryptocurrencies, commodities, or even intellectual property. Unlike security tokens, asset tokens typically do not represent ownership in a traditional security and are not subject to the same regulations. However, asset tokens can still have significant value and may be used as a means of exchange within a particular ecosystem or platform. Examples of asset tokens include Tether (USDT), which is a stablecoin that is pegged to the US dollar, and DigixDAO (DGD), which is a token that represents ownership in physical gold.

Utility tokens are tokens that are designed to provide users with access to a particular product or service. They are often used as a means of exchange within a specific ecosystem or platform, and they can be used to pay for goods or services, access premium features, or participate in governance processes. Utility tokens typically have no intrinsic value, but their value is derived from their ability to provide access to a particular set of goods or services. Some popular examples of utility tokens include BAT (Basic Attention Token), GNT (Golem Network Token), and REP (Augur).

Non-fungible tokens (NFTs) are unique digital assets that are indivisible and cannot be exchanged for an equal unit of value. Unlike fungible tokens such as cryptocurrencies, which are interchangeable with each other, each NFT has a distinct value and cannot be replicated. This makes them ideal for representing things like digital art or collectibles, where uniqueness and authenticity are important. NFTs are typically created using blockchain technology, which allows for secure and transparent ownership and transfer of the asset. These can be profitable transactions, as can be observed with the set of 101 NFTs from the “Bored Ape Yacht Club” collection, which was sold for $24.4 million However, the potential uses for NFTs extend far beyond digital collectibles, with applications in gaming, art, real estate, ticketing, and more.

VAT Treatment of tokens

Already in 2015 the CJEU has ruled that the services of a Bitcoin exchange in exchanging Bitcoin for a traditional currency is exempt from VAT on the basis of the ‘currency’ exemption (Skatteverket v David Hedqvist Case C-264/14). Since then new classes of crypto assets have grown immensely.

If a start-up company only issues a crypto token when it is still not known for which products and services the token could be exchanged in the future, the condition of direct connection between the performed service and received counter-value is not fulfilled yet and the transaction of token issuance is not subject to VAT. When the crypto token is used to pay for individual products and services, these transactions will be subject to VAT (considering the nature of the supply of goods or services, transactions will be taxed at the prescribed tax rate or VAT exempt).

If a certain functionality is already installed in issued tokens – meaning that by purchasing the tokens, supporters acquire the option to use a product or service (in the initial phase, supporters receive them at a lower price than users who buy them later) or they can be considered as a security that generates some kind of yield for investors (payment of dividends or distribution of profit from operations), or they can even have a hybrid character (the functionality and character of a security) – and in such a context, a direct connection between the performed service and received payment can be determined, then the token transaction is subject to VAT, whereby the taxation depends on the character of an individual token and is assessed on a case-by-case basis.

Utility tokens resemble vouchers in that they can be redeemed for goods and services within a limited network, but redemption is not their only purpose and information on the goods and services supplied or the supplier’s identity may be lacking. NFTs, on the other hand, are neither (fully) fungible, nor do they serve (mainly) as a means of payment, contrary to the crypto currencies addressed in the Hedqvist Case.
In short, not only are these classes assets different, but they are in many cases of a hybrid and impermanent nature, which only adds to their complexity. It must be stressed that even tokens that mainly aspire to serve as a utility token typically will have an investment component as tokens can be traded at token exchanges (secondary markets) subsequent to the initial offering.

Security tokens, which are related to virtual shares and debt instrument, should generally have a similar VAT treatment as instruments in traditional capital markets.

Ongoing discussion at EU level

The discussions regarding the VAT treatment of cryptocurrencies are ongoing in the EU. EU VAT Committee published working paper on non-fungible tokens in March 2023. The working paper considers NFTs to be mainly services. If NFTs are used to acquire a tangible good, the transfer of the NFT should qualify as a supply of the said good, according to the working paper. The working paper provides an analysis of the nature of NFTs as well as the way NFTs are created, traded and sold. It considers NFTs with property titles, vouchers, composite supplies and electronically supplied services. It also addresses whether certain payments (e.g., gas fees) could qualify as consideration for a supply from a VAT perspective, and how to determine the taxable amount.


Transactions with tokens raise intricate questions concerning their classification under VAT rules. While existing VAT rules can be used to determine the VAT treatment, it is up to tax administrations and courts to provide legal certainty in the VAT treatment of crypto tokens.