• Hugues Salomé, Partner |
  • André Guedel, Director |


Governments worldwide observe the enormous amount of value creation involving crypto assets and are keen on ensuring that they will get their fair share through taxation. While direct taxes on capital gains or wealth have already been levied with regard to crypto assets, there might be a focus shifting towards indirect taxes such as VAT or sales taxes.

Depending on the character of a crypto asset, tax implications may vary. Crypto assets can be categorized as fungible or non-fungible assets.

Fungible crypto assets can be segmented into three main categories: 

  • Payment tokens such as Bitcoin
  • Utility tokens representing access to services or products 
  • Security tokens with profit distribution or voting rights 

It is currently debated if non-fungible-tokens (NFTs) represent a separate digital or crypto asset class.


Richard wishes to invest in web 3.0 infrastructure projects. Intending to access Initial DEX Offering (IDO) pre-sale opportunities, he purchased native tokens issued by a launchpad for the price of USD 50,000 which he staked for an initial period of one year.

Within three years following his initial investment, Richard realized some staking rewards and gains resulting from his IDO investments equivalent to USD 150,000 and USD 200,000, respectively.

He then invests a good portion of this amount in the acquisition of art NFTs which he believes may significantly increase in value. The remainder is converted into Bitcoins for future spending. After two years, the value of his NFTs dramatically drop, so that Richard is now left with USD 80,000.

In light of his circumstances, Richard may need to consider, among other things, the following taxable events: 

  • Acquisition of utility tokens: this may trigger VAT implications at the level of the buyer, depending on the characterization of the transaction (acquisition of a service vs. goods).
  • Staking reward: this type of income is likely to be subject to income tax in most jurisdictions or may trigger a taxable disposal in some others.
  • Being entitled to participate in a pre-sale: the acquisition of utility tokens at a discounted price may be regarded as a taxable benefit.
  • Selling utility tokens at a gain: this could trigger income and capital gains taxes or even social security contributions and VAT in certain circumstances.
  • Paying goods or services with cryptocurrencies: this may trigger tax consequences depending on how the crypto assets concerned are classified (typically "money" vs. "commodity").
  • Holding crypto assets: a wealth tax would generally be imposed on the ownership of crypto assets in countries where such tax is levied. These assets may also be subject to inheritance tax upon the owner’s demise.
  • Crypto losing value: the losses incurred by private individuals may not be deductible (for example because gains are not taxable or due to losses not being realized in the same year as gains).
  • Buying and selling NFTs: this could trigger income and capital gains taxes or even social security contributions and VAT in certain circumstances. 


While the tax consequences of buying and selling crypto currencies have been addressed by tax authorities in many jurisdictions, that is not the case for other types of income such as rewards derived from locking crypto on a Decentralized Finance (DeFi) exchange platform or VAT implications related to acquiring utility tokens or NFTs.

Private investors holding digital or crypto assets should therefore keep the following in mind:

  • If taxes occur on crypto assets, they are due in FIAT. Crypto holders therefore need sufficient FIAT liquidity to settle tax bills.
  • Exchanging crypto into FIAT and finding banks that accept these FIAT funds might be challenging.
  • Applying existing tax legislation to digital and crypto asset investments can be complex. This often requires a case-by-case analysis based on the features or each specific investment.

Ignoring potential tax consequences may expose investors to penalties and interest for late payments. Over time these accumulate and may at worst lead to shortage of cash to pay taxes due. Understanding tax consequences ahead of making investments is of paramount importance to avoid potential significant financial losses.

Our KPMG crypto tax experts are happy to support you in all questions around the taxation of digital assets.

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