VAT and Platform Tokens – A Defining Interpretation

Is the provision of services involving the purchase of tokens with fiat currency for the purpose of making payments within a closed ecosystem a service exempt from VAT under Article 43(1)(7) of the Goods and Services Tax Act (hereinafter also referred to as the VAT Act)?

VAT-Exempt Token Ecosystems – KIS Position

Recently, one of our clients approached our firm with a similar issue. In light of this, we filed a request on their behalf with the Director of the National Tax Information Office for an individual interpretation.

On March 9 of this year, we received the requested individual interpretation, in which the Director of the National Tax Information Office fully confirmed the correctness of our position. The authority unequivocally recognized that the sale of tokens serving a payment function within a designated ecosystem is exempt from the tax on goods and services.

Below, we present the details of this case, which is of great significance for the FinTech and crypto-asset industries (Ref. No. 0112-KDIL1-3.4012.1.2026.2.KK).

Closed-loop digital tokens – how do they work?

Our client plans to issue its own digital tokens, which users will be able to purchase using fiat currencies (e.g., card payments in EUR, USD, GBP) or cryptocurrencies (ETH, BTC, USDC).

The proposed business model is based on several key assumptions:

• Stable value: The token serves as a store of value, and its exchange rate is pegged to the British pound (1 token = 1 GBP).

• Closed ecosystem: Tokens are accepted as an alternative means of payment exclusively within a strictly defined, contractually bound network of merchant partners.

• No open trading: These assets are not freely transferable or exchangeable on external, open cryptocurrency exchanges.

• Lack of voucher characteristics: The purchase of a token is not a prepayment for a specific, predetermined service or good with a known VAT rate.

The sole purpose of issuing tokens is for them to function as a means of payment and settlement with selected partners. The Company charges a specific commission for the sale of tokens.

Argumentation accepted by the National Tax Information Service (KIS)

On behalf of the Client, we argued that the exchange of traditional (fiat) currencies or cryptocurrencies for proprietary tokens constitutes the provision of services, and due to its payment function, should be exempt from VAT pursuant to Article 43(1)(7) of the VAT Act.

The Director of the National Tax Information Service (KIS) agreed with our argument, pointing to the following legal aspects:

1. The barter nature of the transaction: The exchange of tokens for fiat currencies or cryptocurrencies constitutes, in legal terms, the provision of services for consideration (a so-called “service-for-service” arrangement).

1. Exemption for non-traditional currencies: The authority cited the landmark ruling of the Court of Justice of the European Union in the Hedqvist case (C-264/14), concerning the exchange of traditional currencies for bitcoins.

1. The payment function as the key to exemption: Although the CJEU ruling directly concerned Bitcoin, the Director of the National Tax Information Service confirmed that its principles are fully applicable to other virtual currencies and tokens.

The condition is that the parties to the transaction accept the asset in question as an alternative means of payment, and its sole purpose is to serve as a medium of exchange.

Since the tokens issued by our Client meet this condition (they serve as a means of payment within the platform), their sale constitutes a financial transaction involving non-traditional currencies and is subject to VAT exemption.

No VAT on tokens? A key position

The interpretation obtained by our Law Firm is excellent news for all entities in the FinTech, e-commerce, and Web3 sectors that plan to implement their own closed settlement systems based on blockchain technology.

It confirms that, with the proper structuring of the terms and conditions and the token’s architecture, VAT on the issuance and sale of these digital assets can be avoided.

Are you planning to launch your own token ecosystem? Check whether your model qualifies for a VAT exemption, we’ll analyze its structure and provide an official interpretation. Contact us before you begin the implementation phase.