- The Swiss Federal Administrative Court has issued a ruling on the value-added tax (VAT) treatment of validator nodes in blockchain networks.
- The case involved validators in the Polkadot and Kusama networks who received block rewards and transaction fees for their validation activities.
- The Swiss Federal Tax Administration argued that these activities constituted taxable electronic services, subject to VAT at the standard rate.
- The court ruled that the network itself should be considered the recipient of the validators’ services, as they also create empty blocks for which they receive rewards.
- However, the court also recognized that the activities of the validators directly benefit the senders, who should be considered recipients of the services.
- The court concluded that decentralized networks, such as the ones in question, are not recipients of services for VAT purposes.
- Only the transaction processing should be considered a taxable service, subject to VAT based on the recipient’s location.
- The ruling provides clarity on the VAT treatment of validator activities, but specific details, such as the basis for calculating transaction fees, were not addressed.
- It is important to analyze and assess individual cases in the blockchain industry, as each application may have unique circumstances.
- It remains to be seen if the ruling will be appealed to the Swiss Federal Court.
Source: primetax.ch
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
