Non-fungible Tokens (NFTs) allow for the ownership of a unique digital collectible item (usually an image, video, or audio). They are verifiable & secure through blockchain technology. Because of this, anyone can verify ownership. Not only has this allowed digital artists to sell their work digitally, but many now also trade in NFTs as an investment.
Where people are looking to make investments, Verohallinto is sure to follow. Only recently, the tax treatment of NFTs has become clear. When we last contacted Verohallinto, we were informed that NFTs should be treated as cryptocurrencies for tax purposes. Since then, Verohallinto has published guidance on NFT taxation, including taxation regulations for artists. Below we’ve summarized everything you need to know and discussed how best to declare your NFTs to Verohallinto.
NFT Taxes for Artists
How am I taxed as an NFT artist?
Many digital artists have welcomed NFTs. For the first time, they can sell their art online as an original instead of through merchandise.
If you sell your artwork as an NFT, you will pay earned income tax on the sales price and any resale commissions you receive. If you are paid with crypto, your income is the market value of the cryptocurrency you receive at the time of the sale.
How do I calculate my taxes on NFTs as an artist?
To calculate your NFT income, you have to consider the difference between the value of the cryptocurrencies you receive and the expenses you incur in producing and selling your art.
The expenses you can deduct are, amongst other things
The purchase of drawing software and hardware
Expenses paid toward your NFT marketplace
It can be time-consuming to look for the market values of the received cryptocurrencies if you sell a lot of art. Alternatively, you can use a cryptocurrency tax calculator. NFTs can be imported by submitting your blockchain wallet address. However, it is essential to label your transactions as income to avoid Divly considering them as regular NFT resales, which are taxed slightly differently.
How do I declare my NFT income as an artist?
As an artist, your NFT income is seen as earned income. You must report this under Other Earned Income” on MyTax. You can report any expenses you incur under Deductions -> Expenses for the production of income -> Expenses for the production of other income than wage income:
NFT Taxes for Traders
How am I taxed if I trade NFTs?
You will have to pay capital income taxes over income earned from trading NFTs. If you’ve purchased an NFT and resold it, it is treated the same way as selling a cryptocurrency. Therefore, the tax regulations on cryptocurrencies apply. You’ll be taxed on how much the value of the NTF has increased between the time of the purchase and sale.
How do I calculate my taxes on NFTs if I trade NFTs?
You must pay taxes on the difference between the sales and acquisition prices. Therefore, it is essential to keep track of those two values. The acquisition price is the value in euros of the crypto you spent to buy your NFT at the time of the purchase. The sales price is the value in euros of the crypto you received for your NFT at the time of the sale.
It is beneficial to use a cryptocurrency tax calculator if you’ve traded with many NFTs and cryptocurrencies. You can import your transactions to Divly, and Divly will calculate your gains and losses for you.
You can download an example of Divly’s Custom Upload CSV file here. This document includes both purchases and sales of NFTs.
Step-by-step guide to import NFTs using DIvly’s Custom Upload
- Download Divly’s Custom NFT CSV file.
- Input all of your transactions into the NFT file. Fill in all the transactions that you would like to upload to Divly. You can use the examples as guidance. Each transaction requires its own row. Always use the notation “NFT-” when importing your NFT, as given by the examples in the file. The amount for an NFT should always be “1”.
- Login to Divly and navigate to the Wallets page. Search for “Custom upload” amongst the wallets.
- Drag and drop your edited CSV file to where it says Upload CSV. Divly will import the NFT transactions.
More Information about Divly’s Custom Upload
You can use Divly to automatically import transactions from many wallets and exchanges. But if you would like more info about how to use the custom upload for more transaction types, you can read our guide here.
How do I declare my NFT trading income to Verohallinto?
To declare your NFT taxes, you should use MyTax and take the following steps
Go to Other Income
Select Yes for Capital Gains
Click Add new Transfer
Select Virtual Currencies
You can now enter the information relevant to your transactions, such as the sales prices and acquisition costs.
You can either report each NFT transaction separately or submit all of your transactions at once.
When reporting your transactions all at once, it is important to separate the transactions on which you have made losses from profits. You will have to report once for your profitable transactions and once for your unprofitable transactions. If you’ve made many transactions or traded cryptocurrencies numerous times, it is easier to report your transactions all at once.
You can see our crypto tax guide for more detailed guidance on using MyTax for your NFT and cryptocurrency declarations.