As one of the founders of Bloom, I am pleased to announce that our law firm will soon be active in the metaverse (see below the itw of my partner Michel Maus in the economic newspaper De Tijd). The metaverse offers a lot of opportunities for companies, amongst others law firms looking to host (small) office meetings or even (large-scale) conferences via personal avatars. The metaverse will also cause headaches to tax advisors, who must be prepared to navigate a new highly complex tax landscape. Let us take two concrete examples.
1) Virtual real estate is being purchased each day from metaverse platforms. How should these “real estate” transactions be taxed?
– The assets being traded are not “real estate” as such, but NFTs (NFTs are a certificate of ownership of the piece of virtual real property). When a piece of NFT real estate is purchased in the metaverse using a cryptocurrency, this transaction should in my view not be subject to “registration duties”, but potentially to VAT (in line with the recent declaration of the Belgian minister of Finance – see my comment below).
– If a Belgian resident sells a plot of NFT real estate, one could assume that Belgium (i.e., the jurisdiction of the seller) would have the power to tax the capital gain generated by this digital transaction. Under Belgian tax law, the capital gain would then be exempt if the transaction falls under the “normal management of a private estate”, or taxable (at the rate of 33% or even 50%) if the Belgian seller repeatedly trades NFTs, takes significant financial risks,…
2) A Belgian law firm hosts a conference in the metaverse, where it will interact with other participants’ avatars (established in various countries).
– Where will the profits derived from this activity be taxable ? In my opinion in Belgium, and thus not in the respective jurisdictions of each participant
– Assuming that such virtual event must be treated in the same way as a physical event, VAT would be due “where the event takes place”. But where would that be ? It goes without saying that there is no specific geographical location! Event organisers in the metaverse are currently faced with a lot of complex (VAT) issues… As from 2025, new EU VAT rules should enter into force with respect to virtual events, under which VAT would be due in the country of the customer (and not where the event takes place).
Read also the article in De Tijd
