{"id":39530,"date":"2021-03-25T07:00:57","date_gmt":"2021-03-25T05:00:57","guid":{"rendered":"https:\/\/forklog.com\/en\/?p=39530"},"modified":"2025-08-30T10:02:17","modified_gmt":"2025-08-30T07:02:17","slug":"should-nft-trades-be-taxed-a-comparison-of-the-united-states-russia-and-ukraine","status":"publish","type":"post","link":"https:\/\/u1f987.com\/en\/should-nft-trades-be-taxed-a-comparison-of-the-united-states-russia-and-ukraine\/","title":{"rendered":"Should NFT trades be taxed? A comparison of the United States, Russia and Ukraine"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">NFT fever continues to gain momentum. Celebrities are selling as NFTs a wide range of things \u2014 from <\/span><a href=\"https:\/\/u1f987.com\/en\/news\/grimes-sells-nft-collection-of-unreleased-music-for-6-million\"><span style=\"font-weight: 400;\">music<\/span><\/a><span style=\"font-weight: 400;\"> and <\/span><a href=\"https:\/\/u1f987.com\/en\/news\/artist-pokras-lampas-sells-nft-featuring-projection-of-his-drawing-for-16-eth\"><span style=\"font-weight: 400;\">photographs<\/span><\/a><span style=\"font-weight: 400;\"> to <\/span><a href=\"https:\/\/u1f987.com\/en\/news\/mark-cuban-lists-his-quote-as-an-nft\"><span style=\"font-weight: 400;\">quotes<\/span><\/a><span style=\"font-weight: 400;\"> and <\/span><a href=\"https:\/\/u1f987.com\/en\/news\/jack-dorsey-sells-nft-tweet-for-2-91-million\"><span style=\"font-weight: 400;\">tweets<\/span><\/a><span style=\"font-weight: 400;\">, famous outlets are auctioning <\/span><a href=\"https:\/\/u1f987.com\/en\/news\/time-magazine-puts-three-nft-covers-up-for-sale\"><span style=\"font-weight: 400;\">covers<\/span><\/a><span style=\"font-weight: 400;\">, and one of the world&apos;s oldest auction houses Sotheby\u2019s speaks of the technology&apos;s potential and announces <\/span><a href=\"https:\/\/u1f987.com\/en\/news\/sothebys-to-stage-first-nft-auctions\"><span style=\"font-weight: 400;\">NFT auctions<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><!--more--><\/p>\n<p><span style=\"font-weight: 400;\">But not all is rosy. The NFT sold for almost $70 million by digital artist Beeple described the market as a &#8216;bubble&#8217; (which, however, did not stop him from selling <\/span><a href=\"https:\/\/u1f987.com\/en\/news\/beeple-whose-nft-sold-for-nearly-70-million-calls-the-nft-market-a-bubble\"><span style=\"font-weight: 400;\">another NFT painting<\/span><\/a><span style=\"font-weight: 400;\">), and Litecoin creator Charlie Lee believes that NFTs <\/span><a href=\"https:\/\/u1f987.com\/en\/news\/litecoin-creator-predicts-nft-crash\"><span style=\"font-weight: 400;\">will depreciate<\/span><\/a><span style=\"font-weight: 400;\"> over time due to the &quot;zero cost&quot; of their creation.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Private opinions hardly concern most NFT market participants. However what could be a real unwelcome surprise for many is the need to pay taxes.<\/span><\/p>\n<div class=\"wp-block-text-wrappers-keypoints article_keypoints\">\n<ul class=\"wp-block-list\">\n<li>The NFT market is evolving, with deals worth millions of dollars being made across platforms.<\/li>\n<li>Experts warned US residents about tax implications of NFT sales.<\/li>\n<li>In Russia and Ukraine, NFT taxation rules remain unclear due to the lack of comprehensive digital-assets regulation.<\/li>\n<\/ul>\n<\/div>\n<h2 class=\"wp-block-heading\"><b>US: \u201cPay up in cold, hard cash\u201d<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">In the United States, where many NFT market participants are based, deals to buy and sell such tokens are subject to taxation, experts say.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Residents of the US <\/span><a href=\"https:\/\/u1f987.com\/en\/news\/irs-to-focus-on-residents-crypto-transactions-not-their-holdings\"><span style=\"font-weight: 400;\">do not need to declare crypto holdings<\/span><\/a><span style=\"font-weight: 400;\"> if they follow a long-term holding strategy. However the IRS regards their sale as a taxable event [taxable event].<\/span><\/p>\n<p><span style=\"font-weight: 400;\">According to information <\/span><a href=\"https:\/\/www.irs.gov\/individuals\/international-taxpayers\/frequently-asked-questions-on-virtual-currency-transactions\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">on the IRS site<\/span><\/a><span style=\"font-weight: 400;\">, if virtual currency is part of capital assets, exchanging it for other property, including goods or another currency, you must record losses or gains.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Tax expert Shehan Chandrasekera <\/span><a href=\"https:\/\/www.cnbc.com\/2021\/03\/17\/tax-surprise-looms-for-nft-investors-who-use-crypto-.html\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">of CoinTracker<\/span><\/a><span style=\"font-weight: 400;\"> noted that this carries &quot;serious implications for the NFT craze.&quot;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">There are two tax treatment options for NFT deals, <\/span><a href=\"https:\/\/www.forbes.com\/sites\/shehanchandrasekera\/2021\/03\/11\/how-are-non-fungible-tokens-nfts-taxed\/?sh=621981d71f29\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Forbes<\/span><\/a><span style=\"font-weight: 400;\">. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">The first relates to the creators of such tokens. They must declare profit earned from selling an NFT, the publication notes:<\/span><\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><span style=\"font-weight: 400;\">\u00abIf some Sam created an NFT and sold it for 2 ETH worth $2000, he must report these $2000 as ordinary income\u00bb.<\/span><\/p>\n<\/blockquote>\n<p><span style=\"font-weight: 400;\">For investors who merely buy and sell NFTs, taxation is similar to that applied to ordinary cryptocurrency transactions.<\/span><\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><span style=\"font-weight: 400;\">\u00abBoth buying an NFT with cryptocurrency and selling tokens to realise a profit create a taxable event for the investor. Capital gains tax rules apply to the profit\u00bb,<\/span> <span style=\"font-weight: 400;\">the publication notes.<\/span><\/p>\n<\/blockquote>\n<p><span style=\"font-weight: 400;\">In addition to the federal tax, investors may also face state taxes, CNBC reports.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Because many NFTs are considered collectibles, they may be taxed at a higher rate for high-income individuals at 28%.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Tax does not apply to buyers who purchased cryptocurrency and immediately used it to buy NFT, CNBC notes:<\/span><\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><span style=\"font-weight: 400;\">\u00abTax applies only to those who buy NFT with cryptocurrency whose value has risen since purchase\u00bb.<\/span><\/p>\n<\/blockquote>\n<p><span style=\"font-weight: 400;\">The rules also do not apply to NFT investors not from the United States.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Based on this, the buyer of Beeple&apos;s NFT for $69.3 million, Metapurse founder under the pseudonym Metakovan, based in Singapore, would not have to pay tax.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Beeple himself has already converted the proceeds from selling NFT from Ethereum into U.S. dollars, paying taxes and the auction house&apos;s commissions.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A potential problem for the IRS could be the tax reporting of NFT marketplaces registered or having a presence in the United States.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Chandrasekera noted that platforms may report the sale of tokens, but not the buyer&apos;s profit from the cryptocurrency used to purchase.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Tax experts say that it is practically impossible to determine the total amount of unpaid IRS taxes. They may run into tens or even hundreds of millions of dollars.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Nevertheless, the IRS is unlikely to close its eyes to the situation. In March, agency officials announced the launch of Operation &quot;Hidden Treasure&quot;, aimed at locating U.S. residents who evade taxes on cryptocurrency operations.<\/span><\/p>\n<h2 class=\"wp-block-heading\"><b>Russia in Uncertainty<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">In Russia, the taxation of such deals remains unclear due to the absence of a comprehensive framework for digital currencies, say ForkLog interviewees.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Tax burden applied to income from digital-currency operations is laid out in a government draft law, which has passed only the first reading in the State Duma, i.e. it has not come into force, GMT Legal managing partner Andrey Tugarin noted.<\/span><\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><span style=\"font-weight: 400;\">\u00abThe absence of amendments that have come into force in the Tax Code of the Russian Federation does not allow applying the concept of a taxable event to the purchase\/sale of NFT\u00bb, \u2014 said Tugarin.<\/span><\/p>\n<\/blockquote>\n<p><span style=\"font-weight: 400;\">Senior lawyer at Bryan Cave Leighton Paisner (Russia) LLP, Dmitry Kirillov, stressed that the current bill does not regulate NFT in detail.<\/span><\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><span style=\"font-weight: 400;\">\u00abIn any case the sale of NFT and receipt of money by a Russian resident will not go unnoticed by the tax authorities \u2014 failure to declare income and failure to pay tax will create the risk of tax claims\u00bb,<\/span> <span style=\"font-weight: 400;\">he says.<\/span><\/p>\n<\/blockquote>\n<p><span style=\"font-weight: 400;\">The lawyer noted that in each NFT sale case a content analysis is required, since &ldquo;a copyright object is tied to such a token in one form or another&rdquo;.<\/span><\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><span style=\"font-weight: 400;\">\u00abA NFT could exist either as property (ownership of the underlying NFT) or as a proprietary right. Thus, the decisive factor for taxation, among other important characteristics, will be whether ownership of the underlying asset has transferred\u00bb.<\/span><\/p>\n<\/blockquote>\n<h2 class=\"wp-block-heading\"><b>NFT in Ukraine<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">NFT taxation presents a similar picture in Ukraine.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">According to Eterna Law attorney Kristina Tsybaluk, deciding the tax regime in the absence of regulation raises many questions.<\/span><\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><span style=\"font-weight: 400;\">\u00abAt the moment Ukraine has no legal regulation not only for NFT, but for the crypto market as a whole, so objects and participants in this market are outside the state&apos;s legal field\u00bb,<\/span> <span style=\"font-weight: 400;\">Tsybaluk said.<\/span><\/p>\n<\/blockquote>\n<p><span style=\"font-weight: 400;\">Recall that on 2 December the Verkhovna Rada of Ukraine, in the first reading, approved the draft law \u201cOn Virtual Assets\u201d as a basis. It classifies virtual assets as intangible property.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Lawyers from Alcor, Oksana Petru\u015b and Alina Zorchenko, say that given current legislation it would be most logical to classify NFT as goods, specifically as intangible assets.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In this case, taxation of NFT purchases and sales would arise only on the seller&apos;s side, they note:<\/span><\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><span style=\"font-weight: 400;\">\u00abIncome from selling NFTs by individuals would be taxed at 18% personal income tax and 1.5% military levy, and profits from their sale by legal entities would be 18% corporate income tax. For VAT payers, there are currently no direct restrictions on NFT sales\u00bb.<\/span><\/p>\n<\/blockquote>\n<p><span style=\"font-weight: 400;\">According to Juscutum managing partner Artem Afian, today NFT sales under Ukrainian law fall into base income and are taxed with VAT if the transaction is between a VAT payer company.<\/span><\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><span style=\"font-weight: 400;\">\u00abSale of an intangible asset or any other form of alienation, even written off due to lack of use, by a VAT payer \u2013 all this provides grounds for VAT assessment\u00bb,<\/span> <span style=\"font-weight: 400;\">he says.<\/span><\/p>\n<\/blockquote>\n<p><span style=\"font-weight: 400;\">As NFT is often treated as art, through brokerage one might try to tax only the difference, Afian notes:<\/span><\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><span style=\"font-weight: 400;\">\u00abBut, unfortunately, the very definition of art as property and linking it to commodities today, without further clarifications and possibly legislative changes, does not allow applying such an interesting rate\u00bb.<\/span><\/p>\n<\/blockquote>\n<p><span style=\"font-weight: 400;\">Lawyer Kristina Tsybaluk noted that if an NFT deal contemplates transfer or acquisition of rights to the underlying asset, such transactions are likely to be taxed as personal income tax as other incomes.<\/span><\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><span style=\"font-weight: 400;\">\u00abIf the NFT transaction does not entail transfer\/acquisition of rights to the underlying NFT, but rather is a license of rights to the underlying asset, such operations can be taxed under licensing agreements\u00bb,<\/span> <span style=\"font-weight: 400;\">the expert noted.<\/span><\/p>\n<\/blockquote>\n<p><span style=\"font-weight: 400;\">Lawyers from Alcor also point to peculiarities when crypto and tokens, including NFTs, are bought by Ukrainian residents abroad:<\/span><\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><span style=\"font-weight: 400;\">\u00abIn such operations, given that their nature is not entirely clear, tax authorities may force a buyer to withhold 15% tax on non-resident income, based on the amount of the asset purchased\u00bb.<\/span><\/p>\n<\/blockquote>\n<p><span style=\"font-weight: 400;\">This could potentially be avoided if there is a double taxation treaty between Ukraine and the seller&apos;s country and if the buyer in Ukraine obtains a residency certificate from the seller, lawyers said.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Tsybaluk stressed that it is still difficult to predict exactly how tax authorities will treat NFT transactions; the most likely path is to regulate by analogy with existing legal relationships: <\/span><\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><span style=\"font-weight: 400;\">\u00abTherefore, in Ukrainian law NFT could exist either as property (ownership of the underlying NFT) or as a proprietary right. The decisive factor for taxation, among other important traits, will be whether ownership of the underlying asset has transferred\u00bb.<\/span><\/p>\n<\/blockquote>\n<p><span style=\"font-weight: 400;\">***<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Although the NFT market has existed for a long time, the hype began in 2021.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">With growing public attention to NFT and multi-million-dollar deals, it would be naive to think regulators, including tax authorities, will overlook this market. That means in many countries users can expect clarifications on how to declare and pay taxes on such transactions.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For more on the NFT market potential, read ForkLog&apos;s exclusive.<\/span><\/p>\n<p><em>Author: Alina Saganskaya.<\/em><\/p>\n<p>Follow ForkLog news on Telegram: <a href=\"https:\/\/t.me\/forklogfeed\" target=\"_blank\" rel=\"nofollow noopener\">ForkLog Feed<\/a> \u2014 all the news, <a href=\"https:\/\/telegram.me\/forklog\" target=\"_blank\" rel=\"nofollow noopener\">ForkLog<\/a> \u2014 the most important news and polls.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>NFT fever continues to gain momentum. Celebrities are selling as NFTs a wide range of items\u2014from music and photographs to quotes and tweets, famous outlets auction covers, and one of the world&apos;s oldest auction houses Sotheby\u2019s speaks of the technology&apos;s potential and announces NFT auctions.<\/p>\n","protected":false},"author":1,"featured_media":39531,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"select":"1","news_style_id":"1","cryptorium_level":"","_short_excerpt_text":"","creation_source":"","_metatest_mainpost_news_update":false,"footnotes":""},"categories":[1144],"tags":[1213,27,558,16,26],"class_list":["post-39530","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-longreads","tag-nft","tag-russia","tag-taxes","tag-ukraine","tag-usa"],"aioseo_notices":[],"amp_enabled":true,"views":"28","promo_type":"1","layout_type":"1","short_excerpt":"","is_update":"","_links":{"self":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/39530","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/comments?post=39530"}],"version-history":[{"count":1,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/39530\/revisions"}],"predecessor-version":[{"id":39532,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/39530\/revisions\/39532"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/media\/39531"}],"wp:attachment":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/media?parent=39530"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/categories?post=39530"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/tags?post=39530"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}