The Tax Disputes Commission referred to the ECJ regarding the taxation of transactions involving virtual gold coins used in computer games
The Tax Disputes Commission has referred to the ECJ a question concerning the taxation of transactions involving virtual gold coins used in computer games
The Tax Disputes Commission under the Government of the Republic of Lithuania (hereinafter referred to as the Commission) has referred to the Court of Justice of the European Union (hereinafter referred to as the ECJ) with a request for a preliminary ruling on the application of value added tax (hereinafter referred to as VAT) to the sale of virtual means of payment used in computer games.
This is the second time this year that the Commission has referred a case to the ECJ, and the seventh time since the ECJ noted in the Nidera case (C-385/09) that "the Tax Disputes Commission under the Government of the Republic of Lithuania is a court or tribunal within the meaning of Article 234 EC," thus granting the Commission the right to request a preliminary ruling.
The tax dispute arose over the validity of VAT on sales transactions involving virtual means of payment used in a computer game, namely gold coins.
Gold coins in the computer game can be acquired not only by playing the computer game directly and, depending on the achievements in the game, accumulating gold coins in the player's virtual account, but also from other players, traders, intermediaries, or even exchanges that sell them. Game gold coins are used in various ways: they can be used to purchase various services and items in the game, to pay for player status upgrades, to pay for the opportunity to participate in game events, and to purchase virtual currencies or other game items for other games.
In the case in question, the legal entity received income from online transactions by purchasing gold coins for a computer game from natural and legal persons and reselling them. It recognised the income received from the sale of gold coins in the game as income from trading in virtual currency, which is classified as income from VAT-exempt activities, and therefore did not calculate VAT on the income received. According to Article 135(1)(e) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (hereinafter referred to as the VAT Directive) (and, accordingly, Article 28(4) of the VAT Law), transactions involving virtual currency are considered to be transactions involving the provision of financial services, which are not subject to VAT. Players can earn gold coins in the game by performing various tasks and then use them to purchase virtual game items and services within the game itself, but they cannot be used for payment in the real economy outside the game. In the opinion of the legal entity, the game currency meets the definition of a closed virtual currency, as mentioned in the European Central Bank's 2012 report on virtual currencies.
During an inspection, the State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania (hereinafter referred to as the Inspectorate) decided that the trading of gold coins in a computer game, which players can use to purchase game items or other rights within the narrow space of a single computer game, cannot be considered trading in virtual currency. In the Inspectorate's opinion, a legal entity trading in gold coins from a computer game was providing services, and such activity is considered an economic activity aimed at generating income, therefore VAT should have been calculated on the total value.
Since there is no ECJ case law on the VAT treatment of transactions involving the exchange of virtual currencies in computer games as means of payment, the Commission referred questions to the ECJ. The Commission raised the question of whether gold coins in a computer game can be recognized as virtual currency in essence. If it were clarified that the object of the disputed transactions cannot be recognized as a virtual currency, the question arises as to what the taxable value of the game gold coins should be under the provisions of the VAT Directive: the total consideration for the gold coins sold or only the difference between the purchase and sale prices.
The Commission recalls that on October 22, 2015, in Case C-264/14 Hedqvist, the ECJ examined the question of whether transactions involving the purchase and sale of bitcoins are subject to VAT and recognised that the provision of services consisting in the exchange of traditional currencies for units of the virtual currency bitcoin and vice versa, carried out in return for a sum equal to the margin, i.e. the difference between the price paid by the trader when purchasing the currency and the price at which he sells it to his customers, are not subject to VAT.
The ECJ also ruled that currency exchange transactions involving non-traditional currencies, i.e. currencies other than those that are legal tender in one or more countries, are financial transactions if the parties to the transaction recognize these currencies as an alternative means of payment to legal tender and if there is no other purpose for these currencies than to be used as a means of payment. Thus, there are two essential features of non-traditional currency transactions: mutual recognition by the parties to the transaction that it is a means of payment, and actual use solely for payment purposes.
Last updated: 21-11-2025
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