Virtual video game currency: the CJEU refuses the “currency” exemption and rules out the qualification of a multi-purpose voucher

I. Facts and context

The dispute was between a Lithuanian company, MB 'Žaidimų valiuta', and the Lithuanian tax authority. The activity of this company consisted in buying and then reselling, against traditional currencies, the “gold” used in online gaming Runescape.

After an audit covering the years 2020 to 2023, the administration considered that these transactions constituted supplies of services subject to VAT. The company, having neither declared nor paid this tax, was claimed the corresponding VAT, with late payment interest and a fine.

The company maintained, primarily, that this “gold” should be treated as a virtual currency, so that foreign exchange transactions should benefit from the exemption applicable to currency transactions, in the same way as the solution adopted by the Court in the judgment Hedqvist about bitcoin.

In the alternative, she argued that they were multi-purpose vouchers, which should lead to the exclusion of taxation on the total value exchanged. Finally, it contested that the tax base could relate to the total selling price, arguing that it should, where appropriate, be limited to the margin.

For its part, the administration considered that the currency in question could only be used in video games, which excluded its classification as a currency within the meaning of Article 135 (1) (e) of Directive 2006/112/EC. She also maintained that this virtual unit could not be regarded as a multi-purpose voucher.

II. The legal question

The question put to the Court was therefore twofold.

On the one hand, the issue was to determine whether the exchange of real currency for units of virtual currency that could only be used in an online video game could fall within the exemption provided for in Article 135 (1) (e) of the VAT Directive, relating to transactions involving currencies, bank notes and currencies used as legal means of payment.

On the other hand, in the event of a negative answer, the challenge was to know whether these virtual units could be qualified as “good”, and more precisely as “multi-use vouchers”, within the meaning of Article 30a of Directive 2006/112/EC, which could have affected the tax base. Otherwise, it was necessary to determine whether the general rule should lead to taxation of all the consideration received.

III. Applicable rules

Article 135 (1) (e) of the VAT Directive requires Member States to exempt, in particular, transactions involving “currencies, bank notes and currencies that are legal means of payment” (transposed to Article 261 C of the CGI).

The exemptions in Article 135 are autonomous concepts of European Union law and must be interpreted strictly, since they derogate from the principle that VAT applies to every service provided for consideration by a taxable person.

As an extension of the judgment Hedqvist (CJEU, 22 Oct. 2015, C-264/14), the Court also recalls that non-traditional currencies (bitcoin in the judgment in question) may, in certain cases, fall within this exemption. However, two cumulative conditions must be met: they must be accepted by the parties as an alternative means of payment to legal means of payment and have no other purpose than that of a means of payment.

With regard to vouchers, Article 30a (1) of the Directive defines “voucher” as an instrument with an obligation to accept it as total or partial consideration for the supply of goods or services, with the goods or services concerned — or the identity of the suppliers or potential providers — having to be indicated on the instrument or in the corresponding documentation. Point 3 of the same article defines a multi-use voucher as any voucher other than a single-use voucher.

IV. The reasoning adopted by the Court

A. The refusal of the currency exemption

The Court begins by reiterating the logic of its judgment Hedqvist : a non-traditional currency may fall under Article 135 (1) (e) if it is used as an alternative means of payment and has no other purpose than that of a means of payment. However, the Court points out that these conditions are cumulative.

Applying this grid to the present case, it notes that the “gold” in question has no other purpose than to be used in an online video game. It is not accepted, outside of this environment, as a means of payment to acquire real goods or services. The Court adds that this finding is supported by the conditions of use of the game, which in essence provide that the elements related to the game, including this “gold”, do not belong to the players but always belong to the publisher with a license to use it.

Subject to the verifications of the referring court, the Court concludes that the conditions for exemption are not met.

The important point here is not only that the virtual unit is not a legal means of payment. The Court has since admitted Hedqvist that this is not decisive.

What wins the solution is the functional confinement of the asset in a closed universe: its use remains purely internal to the game and does not extend to the general market for goods and services. Therefore, it cannot be considered as a means of payment.

B. The rejection of the qualification as good for multiple uses

The Court then examined the alternative argument based on Article 30a of the VAT Directive. It recalls that the qualification of good presupposes in particular the existence of an instrument that must be accepted as consideration for the supply of goods or the provision of services.

However, according to the Court, the “gold” of Runescape is not used to provide a subsequent consumable benefit in the form of another service to be determined.

It itself is one of the elements of online gaming and is, as such, similar to an electronic service that is an integral part of this game. Here, the Court reiterates the idea of “consumable advantage”: the user receives the service directly and consumes it as such in the game world. He can directly use this virtual currency to buy another virtual asset from a non-player character in the game without this operation being an event within the meaning of VAT.

Therefore, the virtual unit cannot be regarded as a good one; a fortiori, it cannot be described as good for multiple uses.

The reasoning is particularly structuring. It is not just about saying that the technical conditions for the voucher are not met.

More fundamentally, it is based on the idea that the digital asset in question is not the instrument giving access to a distinct future service: it is itself an element of the overall electronic service.

C. The impact on the tax base

Once the “currency” exemption and the qualification of multi-use voucher are removed, the tax-based solution becomes direct. The Court holds that, since “gold” must be classified as an electronic service, VAT is due according to the general rule of Article 73 of the VAT Directive, that is to say on the full consideration received for its sale, and not on the sole margin between purchase price and resale price.

Indeed, the second-hand goods regime is only applicable to tangible goods and not to services (article 311 of the Directive). In the absence of application of the voucher regime, VAT is therefore applicable to the total price.

V. The practical scope of the decision

The main practical lesson of the judgment is clear: the mere fact that a digital asset is exchanged for legal tender currencies is not sufficient to make it fall within the scope of the financial exemption under Article 135 (1) (e).

To hope to fall under this provision, it is still necessary to demonstrate that the asset is accepted as a genuine alternative payment method and that it has no other purpose than this payment function. An asset confined to the internal economy of a platform or a game does not, in principle, meet this requirement.

The judgment is also of major interest for operators who may have been tempted to reason by analogy with multi-purpose vouchers. The Court closes this path when the digital unit itself constitutes the advantage consumed in the environment concerned.

For practitioners, the judgment invites operators to check several points:

• contractual documentation and general terms of use;
• whether or not there is an external use of the asset;
• the exact qualification of the main service;
• and, more generally, the question of whether the digital unit constitutes an instrument for accessing a distinct future service or whether it is already one of the elements of the service consumed.

On the other hand, the Court does not say that every digital asset is an electronic service. It rules on virtual currency units that can only be used in an online video game and provide access to certain functionalities within this game. The Court does not question the case law relating to digital assets called units of values such as bitcoin.

VI. The questions left unanswered

The decision clearly settles the case of a virtual currency locked in a video game, but several questions remain open.

First, the Court does not rule on all digital assets circulating in hybrid ecosystems, i.e. environments in which unity could, in fact or in law, be used beyond the original platform (for example a digital asset that can be used in a game and as a means of payment outside the game or a digital asset from a game that would be misappropriated to be used as a means of payment by operators).

Thus, the solution seems to lead to a distinction between purely closed assets and assets that have a genuine external economic use, but this border is not completely drawn by the judgment.

Second, the Court's reference to the terms of use, according to which the elements of the game do not belong to the players, is important, but its exact scope must be handled with caution.

Conclusion

In short, the CJEU confirms that a virtual currency that can only be used in an online video game does not fall under the exemption applicable to currency transactions provided for in Article 135 (1) (e) of the VAT Directive, nor does it fall under the concept of voucher within the meaning of Article 30a.

In the present case, it must be treated as an electronic service falling under the general rule of Article 73 for the determination of the tax base.

For operators and their advisers, the decision requires increased vigilance: as soon as a digital asset remains confined to a closed universe and itself constitutes a direct advantage (consumed advantage), the path of financial exemption such as that of the voucher regime seems closed.