Articles 311 to 315 of the EU VAT Directive provide a margin mechanism for specified goods, including certain works of art. This mechanism allows taxpayers to subject only their margin to VAT, thereby reducing the VAT due on sales and avoiding double taxation. Since it is a special arrangement that deviates from the general VAT Directive, its scope must be interpreted narrowly.
Crypto art does not qualify for the margin mechanism for works of art under the VAT Directive as it is not included in the list of qualifying works. This list details specific types of art, such as pictures, drawings, prints, lithographs, photographs, sculptures, and tapestries, many of which must be hand-made, signed by the artist, and limited in copies. The list also excludes objects created through mechanical or photomechanical processes. Crypto art, a subgenre of digital art reliant on blockchain technology, is not a tangible property and therefore does not qualify as a good under the VAT Directive, unlike the artworks listed. Furthermore, the margin mechanism dates back to the 1990s when crypto art did not exist, hence indicating that works of crypto art are not historically targeted by the mechanism.
Similarly, the EU VAT Directive allows EU member states to apply a reduced rate of VAT to certain works of art, based on the same list of specified works of art above. Therefore, the same analysis applies to the application of the reduced VAT rate to crypto art. Hence, it concluded that reduced rates do not apply to crypto art.
