What was the subject matter of the decision by the Lower Saxony Tax Court of 10 July 2025, 5 K 26/24?
So far, no ruling by the Court of Justice of the European Union (CJEU), the German Federal Fiscal Court (BFH), or any tax court has addressed the VAT treatment of trading in non-fungible tokens (NFTs). Nor has the German tax administration published any guidance on this issue.
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The ruling by the Lower Saxony Tax Court concerned the following (simplified) case: A VAT-registered entrepreneur based in Germany traded NFTs linked to digital image files in 2021 as a reseller. These NFTs were part of collections and treated as collectible digital assets (so-called NFT collectibles). NFTs are non-fungible by nature. The sales of NFTs were carried out primarily via the digital marketplace “OpenSea”, which is not based in Germany, and utilised smart contracts. These smart contracts are not considered contracts in the legal sense. What was traded was not legal (fractional) ownership of the digital image or collectible itself, but rather a database entry on a decentralised blockchain. Once the conditions of sale were met, the NFT would be transferred to the buyer’s wallet, replacing the seller’s public key with that of the buyer. The seller’s crypto wallet would then be credited with the sale price, minus platform commissions and transaction fees.
What did the Lower Saxony Tax Court decide?
The Lower Saxony Tax Court ruled as follows in relation to the case:
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The seller provides a “supply of services” within the meaning of Section 3(9) of the German VAT Act (UStG).
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As the purchasers did not use a VAT ID number, comparable foreign certificates or other evidence to prove their VAT-registered status, they were deemed non-taxable persons. Therefore, the sale constitutes an electronically supplied service, taxable in the country of residence of the purchaser (Section 3a(5)(1)(1) in conjunction with (2)(3) UStG).
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The case does not involve a deemed supply chain within the meaning of Section 3(11a) UStG, i.e. no fictitious service from the seller to the platform and from the platform to the buyer.
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For transactions taxable in Germany, the standard VAT rate of 19% applies.
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For the year 2021, there was no structural enforcement deficit that would infringe Article 3 of the German Constitution (Grundgesetz).
What are the VAT implications for practice?
According to the court’s press release, the decision is final and legally binding — no appeal was filed with the Federal Fiscal Court (BFH). Unlike BFH rulings published in the Federal Tax Gazette (BStBl), this ruling is not binding on tax offices. This creates legal uncertainty for taxpayers regarding the VAT treatment of NFT trading.
However, the court’s reasoning appears convincing. It supports the position taken by the tax office during the objection proceedings: that the sale of NFTs constitutes an electronically supplied service. Therefore, it is likely that other tax offices will follow this interpretation in similar cases going forward.
That said, it is not permissible to generalise tax consequences for blockchain-based transactions. For example, every sale of an NFT to private individuals via a platform is to be treated as an electronically supplied service, taxable at the purchaser’s place of residence. Each transaction must be carefully analysed, and the specific facts determine the applicable VAT treatment, which may differ depending on the case.
Additionally, the court confirmed — as previously seen in income tax cases relating to cryptocurrencies (see BFH, BStBl II 2023, 571) — that a structural or normative enforcement deficit is not assumed merely due to missing or unverifiable data relevant for taxation.
Contrary to the tax office’s position, the court ruled that the sales must be apportioned between domestic and foreign customers based on estimation (Section 162 of the German Fiscal Code – AO).
What action should traders take?
In light of this decision, taxable traders involved in NFT transactions should promptly review their situation to determine whether they need to file or correct a VAT return.
What does this mean for platforms?
The ruling is also relevant for NFT trading platforms. Firstly, they do not have to comply with the platform rules applicable to goods. Secondly, the principles established by the CJEU in its ruling of 28 February 2023 (Fenix International Ltd.) relating to social media platforms are not transferable to this scenario. This means that NFT platforms do not provide a deemed service to the buyer under Section 3(11a) UStG in relation to the NFT sale.
