PF’s revenues from NFT trading

Non-fungible token (NFT) income is taxable income.

As defined by Wikipedia.ro, a non-fungible token (NFT, after the English term non-fungible token) is a unique unit of data in a computer accounting register called blockchain. non-fungible token match files of various formats, depending on the nature of the creation process: Photos, audio recordings, video clips, etc. Although the files themselves can be copied, the unreadable chips that are associated with them are permanently registered and monitored in the blockchain records of which they belong, providing buyers with proof of ownership.

Widely used registries, such as Ethereum, Bitcoin cash, flux, etc., each have a set of standards regulating the use of NFTs.

Non- fungible tokens can be used to market digital creations, such as digital art, video game items, and music. However, both the file containing the original creation and any copy of it can be accessed by anyone, not just the token owner. The first NFTs appeared in 2015 in the Ethereum blockchain registry.

Thus, as a digital asset in the real world, NTFs can be used to obtain physical exchanges on the digital market.

Individuals who obtain revenues from the sale, on specialized platforms, called blockchain, of content in the form of digital files (NFT), under the conditions of Law no. 8/1996 on copyright and related rights, have the obligation to declare these revenues, regardless of whether the income is made in Romania or abroad, in the “Single Declaration on income tax and social contributions due by individuals”, in compliance with the provisions of art.71 “Definition of income from Romania from intellectual property rights” and art. 72¹ “Establishment of the annual net income from intellectual property rights” or art. 73 “The option to establish the annual net income, in real system based on the accounting data”, as the case may be, from the Fiscal Code.

Since the content creator will obtain, after the initial sale, income from recurring/repeated sales (NFT royalties), it is also obliged to declare such income in the Single Declaration on income tax and Social contributions due by individuals to the same category of income.

Establish the date of realization of income from the transaction of the NFT:

The income realization date is the date on which the transaction (sale – purchase of NFT) was carried out, independent of the date on which the natural person who sold the product chooses to trade or withdraw from wallet – the virtual/to change to FIAT the cryptomonets representing the price of the product.

Fiat represents the currency of a country which its own government has declared to be legal means of payment.

Tax treatment of intellectual property rights revenues:

Declaratory tax and payment obligations are those of natural persons who make intellectual property rights revenue)

  • Income from intellectual property rights paid by legal persons or other entities that have the obligation to keep the accounts:

Taxpayers who earn income from intellectual property rights owe income tax, the tax being final.

The gross income from intellectual property rights includes both the amounts collected during the year and the equivalent in lei of income in kind.

The evaluation of the incomes in kind is made at the market price or at the price established by the technical expertise, at the place and at the date of their receipt.

The net income from intellectual property rights, including the creation of monumental works of art, is determined by income payers, legal entities or other entities that have the obligation to keep accounting records, by deducting from gross income the expenses determined by applying the flat rate 40% of gross income.

Flat-rate expenses include, but are not limited to: social security contributions, commissions, amounts due to collective management organizations or other income payers as payment for services provided by the latter to rights holders.

In the case of the exploitation by the heirs of the intellectual property rights, as well as in the case of the remuneration representing the resale right and the compensatory remuneration for the private copy, the net income is determined by deducting from the gross income the amounts belonging to the collective management authority or other payers such income, according to the law, without the application of the flat rate of expenses of 40% on the gross income.

The net income from intellectual property rights shall be determined as the difference between the gross income and the Commission due to collective management authority or other payors which, under law, have the power to collect and distribute the income to rightholders, in the following cases:

  • income from intellectual property rights transmitted by succession;
  • income from the exercise of the resale right;
  • revenue representing compensatory remuneration for private copying.

The payment of the income from intellectual property rights, subject to the obligation to calculate and retain the tax, shall be, as appropriate:

(a) users of works, inventories, know-how and the like where the rightholders exercise their intellectual property rights in a personal manner and where the contractual relationship between the copyright holder and the user is direct;

(b) collective management authority or other entities which, in accordance with legal provisions, have the power to manage intellectual property rights, the management of which is entrusted to them by their holders. This is also the case for producers and agents authorized by rightholders, through which the rights in question are collected and distributed.

If the amounts representing revenues from the exploitation of intellectual property rights are collected by several collective management authority or other similar entities, the obligation to calculate and withhold tax falls on the authority or entity that makes the payment to the holder of intellectual property rights.

The payers of intellectual property rights have the obligation to calculate, withhold and transfer during the fiscal year the tax due by the taxpayers. The tax due is calculated by applying the 10% rate on the net income. The tax is withheld from the income paid by the income payers at the time of payment of income.

The tax calculated and withheld shall represent final tax and shall be paid to the state budget by 25 inclusive of the month following that in which it was detained.

Income-payers shall not be required to calculate, withholding, and to pay tax on income paid if they make payments to associations without legal personality, as well as to entities with legal personality, which organize and run their own accounts, in accordance with the law, for which the payment of income tax is made by each member on his own income.

Natural persons who make income from intellectual property rights, for whom the net income is determined on the basis of flat-rate expenditure rates and for whom the tax is withheld at source shall not have any declaratory obligations.

The tax payers, legal persons or other entities that have the obligation to keep accounting records, are not under the obligation to complete the Register of fiscal records and to manage the accounting records.

  • The income from intellectual property rights received from payers other than those mentioned above:

Net income from intellectual property rights, including the creation of monumental works of art, received from other payers than those provided for in Chapter II from the guide, it is established by the taxpayers by deducting from the gross income the expenses determined by applying the 40% quota on the gross income.

In the case of the exploitation by the heirs of the intellectual property rights, as well as in the case of the remuneration representing the resale right and the compensatory remuneration for the private copy, the net income is determined by deducting from the gross income the amounts belonging to the collective management authority or other payers. such income, according to the law, without the application of the flat rate of expenses of 40% on the gross income.

In order to determine the net income from intellectual property rights, the taxpayers can complete only the part referring to the income from the Register of fiscal evidence.

In the case of incomes obtained by individuals who trade NFT creations, other than the author who makes public for sale his creation, the essence of the transaction, respectively of the activity carried out / performed leads to the classification of the incomes obtained in the income categories defined by the fiscal legislation in force. the rules applicable for their declaration, as well as for the calculation of the income tax and of the due social contributions.

Although an NFT does not offer copyright, it does offer the right to use it, such as posting a video or image online.

Legal basis:

www.anaf.ro,

https://ro.wikipedia.org/wiki/Jeton_nefungibil;

Law 8/1996 on copyright and related rights – republication, with subsequent amendments and additions;

The fiscal Code (approved by Law no. 227/2015, published in MO no. 688 of 10.09.2015), with subsequent amendments and additions.