CJEU: In-game gold is not virtual currency

What this means for your organisation 

The ruling confirms that the VAT treatment of virtual currencies depends on their function. Currencies such as bitcoin, which serve as a means of payment outside a closed ecosystem, may qualify for a VAT exemption. Virtual currencies confined to a single game environment, by contrast, do not appear to meet the conditions for a VAT exemption, irrespective of the volume at which they are traded.

For businesses active in the gaming industry or in digital asset trading, it is important to carefully assess the VAT treatment of virtual items and currencies. The classification of these items, as electronic services, virtual currencies, or vouchers, directly determines your VAT obligations.

Background

The case concerns a Lithuanian company, MB "Žaidimų valiuta", whose main business activity consists of buying and reselling virtual gold used in the online video game Runescape in exchange for traditional currencies. During a tax audit covering the period 2020–2023, the Lithuanian tax inspector found that the company had neither declared nor paid VAT on these transactions. The company was ordered to pay VAT on the transactions.

Žaidimų valiuta challenged this decision, arguing that in-game gold should be treated as a virtual currency, similar to bitcoin, and that its sale should therefore be exempt from VAT under art. 135(1)(e) EU VAT Directive, in line with the CJEU's earlier ruling in Hedqvist (C-264/14). In the alternative, the company argued that in-game gold qualifies as a "multi-purpose voucher", meaning that only the margin (the difference between purchase and sale price) should be subject to VAT. The Lithuanian Commission for Tax Disputes referred two preliminary questions to the CJEU.

CJEU Judgment

In-game gold is not a virtual currency exempt from VAT

The CJEU recalled that the VAT exemption for currency transactions can cover non-traditional currencies, but only where two cumulative conditions are met: (1) the currencies have been accepted by the parties as an alternative means of payment to legal tender, and (2) the currencies have no purpose other than that of a means of payment. 

The CJEU found that in-game gold does not meet these conditions. The gold can only be used within the online video game and does not constitute a currency accepted outside of the game as a means of payment for real goods or services. Moreover, the terms of use of Runescape provide that game-related products, including in-game gold, do not belong to the players. Consequently, the purchase and sale of in-game gold cannot be VAT exempt. 

In-game gold is not a voucher

The CJEU then examined whether in-game gold could qualify as a "multi-purpose voucher". There are two cumulative conditions for an instrument to be classified as a voucher: it must carry an obligation to accept it as full or partial consideration for a supply of goods or services, and the goods or services (or the identity of the potential suppliers) must be indicated on the instrument or in the corresponding documentation.

The CJEU concluded that, even if the second condition were met, in-game gold does not satisfy the first condition. As Advocate General Kokott pointed out, in-game gold is itself an element of an online game and constitutes an electronic service forming an integral part of that game. The gold is the consumable benefit itself, the service received and used by the player within the game, rather than an instrument that gives access to a separate, subsequent consumable benefit, as a voucher would. Therefore, in-game gold cannot be classified as a voucher, nor as a multi-purpose voucher. 

VAT applies to the full sale price

Since in-game gold must be classified as an electronic service, the taxable amount for VAT purposes is the full consideration received for its sale. In the AG opinion, it was suggested that the margin scheme could apply to resales of digital products on secondary markets. However, the CJEU did not address this point.