Creator royalty fee on resale NFT is subject to VAT

Creator Royalty Fee Defined: The creator royalty fee, which is automatically received by the NFT creator X on each resale, is considered a fee for a service, as established by the Dutch Tax and Customs Administration’s Turnover Tax Knowledge Group.
Legal Relationship Established: Each resale creates a legal relationship between the creator and the buyer, where the creator grants permission to trade the NFT under the conditions set by the smart contract, fulfilling the criteria for reciprocal exchange of services as required by VAT legislation.
CJEU Precedents Cited: The ruling aligns with the CJEU’s interpretation in the UCMR – ADA case, affirming that the fee represents actual consideration for an identifiable service, contrasting with previous cases where parties acted autonomously without adherence to creator-imposed terms.

Knowledge group position: Creator royalty fee on resale NFT fee performance before VAT

Creator Royalty Fee as Performance Compensation: The Turnover Tax Knowledge Group has determined that the creator royalty fee received by an NFT creator upon resale is classified as compensation for a performance, affirming its taxable nature.
Smart Contract Conditions: The NFTs are governed by a smart contract that stipulates the trading conditions and requires payment of the creator royalty fee for each resale. This contract is immutable and ensures that the creator receives a percentage of the resale price without influence over the resale amount.
Non-Autonomous Transactions: The Knowledge Group emphasized that buyers and sellers cannot negotiate independently; they must adhere to the terms set by the creator in the smart contract, reinforcing the view that the creator royalty fee is intrinsically linked to the performance of granting trading rights for the NFT.