The VAT classification of virtual currencies in online video games
In Case C-472/24, the Court of Justice of the European Union (“CJEU”) clarified the VAT treatment of virtual currencies used in online video games. At the core of the dispute lies the issue of the economic and legal function of “closed-loop” digital units, which are incapable of discharging obligations outside the ecosystem in which they are created. The Court accordingly excluded both their characterization as means of payment and their qualification as vouchers, on the basis that the virtual utility directly coincides with the electronic service enjoyed by the user. The judgment contributes to clarifying the criteria governing the tax classification of emerging digital economies.
The case
In its judgment in Case C-472/24, the CJEU addressed an issue of increasing relevance in the taxation of the digital economy: the VAT classification of virtual units used within closed online platforms and, more specifically, of currencies used in multiplayer online video games.
The dispute originated from a tax assessment issued by the Lithuanian tax authorities against Alfa which operates in the buying and selling of virtual currency in an online video game – commonly referred to as “gold” – in exchange for real currency.
Following a tax audit, the Lithuanian authorities classified those transactions as supplies of services subject to VAT and charged the company with failing to pay the tax. The taxpayer contested the assessment, arguing that the “gold” should be treated as a VAT-exempt virtual currency pursuant to Article 135(1)(e) of Directive 2006/112/EC (the “VAT Directive”), based on the principles established by the Court in Hedqvist concerning bitcoin. In the alternative, the taxpayer argued that such digital units should qualify as “multi-purpose vouchers” within the meaning of Article 30-bis of the VAT Directive.
The referring court noted, however, that the terms and conditions governing the video game expressly provided that neither the user account nor the virtual items associated with the game were transferred to the players’ ownership. Although the “gold” granted advantages and functionalities within the virtual environment, it remained confined to the game ecosystem itself. The Lithuanian court therefore asked the CJEU to clarify, on the one hand, whether such transactions could benefit from the exemption applicable to transactions concerning currency and means of payment and, on the other hand, whether those virtual units could be regarded as multi-purpose vouchers for VAT purposes.
The Court’s decision
The Court first addressed the possible application of Article 135(1)(e) of the VAT Directive, which exempts from VAT transactions concerning currency, banknotes and coins used as legal tender.
The Court’s reasoning builds upon its earlier judgment in Hedqvist, in which it had recognised that even a currency lacking legal tender status, such as bitcoin, could benefit from the VAT exemption provided that it was accepted as an alternative means of payment and had no purpose other than serving as a means of payment. The Court nevertheless clarified that those conditions must be cumulatively satisfied and that, in the present case, they were not met.
The judges observed that the virtual unit at issue could be used exclusively within the online video game and did not constitute a currency accepted outside that ecosystem as a means of payment. In other words, the “gold” has no function of discharging obligations in economic transactions outside the game.
Indeed, the discharge function implies that an instrument must be capable of extinguishing financial obligations within an economic context autonomous from the technical system generating it . In the present case, by contrast, the virtual unit remained entirely subordinate to the architecture of the video game, lacked any independent economic or legal existence, and did not circulate as a generally accepted means of payment. Its usability was therefore confined to a closed digital environment and depended entirely upon the contractual rules imposed by the platform operator.
The Court further excluded the possibility that such virtual units could qualify as “vouchers” within the meaning of Article 30-bis of the VAT Directive.
The concept of a voucher presupposes the existence of an instrument that grants its holder the right to obtain, at a later stage, a service distinct from the instrument itself. A voucher therefore operates as a representative instrument of future consumption.
In the case of virtual “gold”, however, that structure was entirely absent, since the virtual unit itself already constituted the consumable advantage . It was not an instrument intended to procure a separate future supply; rather, it was itself the digital utility directly enjoyed by the user within the context of the video game.
Put differently, a voucher is ontologically distinct from the supply to which it grants access; in the present case, however, the title and the utility coincided. The “gold” did not represent a right to obtain a separate and subsequent service but directly formed part of the electronic service supplied within the game.
Accordingly, the Court concluded that, since the virtual currency constituted neither an exempt means of payment nor a multi-purpose voucher, the transactions had to be classified as ordinary electronically supplied services subject to the general VAT regime. Consequently, pursuant to Article 73 of the VAT Directive, the taxable amount corresponded to the entire consideration received for the sale of the virtual “gold”, rather than merely to the operator’s economic margin.
Concluding remarks
The judgment appears coherent both in the solution adopted and in the methodology employed. The Court appropriately avoided extending the notion of “virtual currency” beyond reasonable limits through a purely nominalistic approach. VAT classification correctly continues to depend upon the concrete economic and legal function of the transaction rather than upon the terminology employed by digital operators.
From this perspective, the judgment marks an important limitation on the increasingly widespread tendency in digital markets to assimilate every tradable token to a financial or monetary instrument. The Court clarified that the mere economic transferability of a digital unit is insufficient to confer upon it the status of currency. What must instead be verified is whether the unit actually performs the function of an autonomous and generally accepted means of payment outside the ecosystem that produces it.
The decision is also persuasive insofar as it excludes the classification of “gold” as a voucher. This aspect of the reasoning reveals significant conceptual coherence: a voucher necessarily presupposes the existence of a future supply distinct from the instrument granting access thereto, whereas in the present case the digital utility already coincided with the service enjoyed by the user.
Nevertheless, the issue remains open as regards the absence of a specific VAT regime governing the secondary circulation of digital utilities. The current framework continues to rely upon categories developed within a material economy grounded in the traditional distinction between goods and services, a dichotomy from which contemporary digital markets increasingly escape.
Looking ahead, the judgment represents not an endpoint but rather the first step towards a future evolution of European legislation. The growing capitalization of digital utilities will inevitably require reflection on the tax treatment of secondary virtual markets, particularly where such assets acquire increasing interoperability across platforms and an external usability progressively resembling that of genuine digital currencies.
From this perspective, the judgment under review extends well beyond the confines of VAT law as applied to online video games. It constitutes one of the first decisions in which the Court attempts to delineate the legal boundary between virtual currency, digital service, and consumable electronic utility, a boundary likely to become one of the central issues of European tax law in the coming years.