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Service provider in blockchain based platform accepting Tokens

How to deal with accounting?

Blockchain based marketplace projects are recently booming and aim to positively disrupt the current economic paradigm of centralized platforms by involving more parties and reducing the need of trust party in the equation.

In this context utility tokens are emerging and are basically used as a mean of payment for specific services rendered within these new ecosystems. The success of such platform would mainly depend on the volume of transactions performed and the incentive market players would have to onboard.

One recurring concern from market players is the accounting and tax treatment in the cryptoworld.

How to book Tokens received in exchange of services in the financial accounts and how to treat them from a VAT and income tax perspective?


Debates at international level are focusing on these topics. However so far the least to be said is that no clear rules have beeing set. In absence of clear guidance, once should go back to the fundamentals of accounting and tax:

Trying to reflect as much as possible the reality of the facts and circumstances and apply the existing rules accordingly.

In this context, accounting and tax treatment should be assessed on a case by case study with the help of adequate professionals.Happen Consult Sarl can assist you on that matter. It is to be noted that such treatment and analysis is general and might differ depending on the countries concerned.

In the meantime, please find below a high-evel analysis on the key elements to take into account when accepting token as a mean of payment for services provided:


Accounting and corporate tax treatment

The Tokens received in exchange for a service could be viewed as a barter. “I give you a service and you give me Tokens”. In such situation the Tokens are used as a “unit of payment” that should be accounted as taxable business income in FIAT curency at the time of the transaction (i.e. date the Tokens were received in the accounts of the service provider, ready to be transferred to his compatible crypto-wallet), using a fair market value in FIAT curency. In case there is an active market (e.g. cryptoassets exchange platform) stating the value such approach shall be acceptable from an accounting point. When no such active market is available market value shall be measured differently (e.g. at cost or at a disposal price).

In order to reduce or mitigate exchange risk (i.e. gain or loss upon the fluctuaction of the Token’s value) a possibility would be to immediately sell such Tokens against FIAT.

VAT treatment

Payment in Tokens does not change the VAT treatment of someone’s activity. In this context, the same rules shall apply as for any services paid in FIAT.

As a reminder, VAT should be based on the service price that will be in such case denominated in Tokens. Such amount shall be converted into the currency used for the accounts of the provider (e.g. FIAT currency) at the time the VAT is due (in practice upon issuance of invoice or upon completion of the services). The accounting treatment recommendation mentioned above shall be applicable for VAT payables. It is recommended to immediately exchange/sell the Tokens corresponding to the VAT due to the tax authorities into FIAT in order to mitgate exchange exposures. The question whether such transaction shall be further subject to VAT remains however open.

The positive point with blockchain based platform run via smart contracts is the simultaneity of the service rendered and payment, mitigating further exchange exposure due to the time gap between income recognition and payment.

Disclaimer Please note that this paper is for informational purposes only, and not in any way intended to be relied upon or as any form of legal, tax or investment advice. You must always consult your own advisors in light of your individual circumstances. Under no circumstances, the author will be liable for the accuracy, quality or reliability of this paper – which is only designed to provide an introduction to a topic around which there can be a forum for debate. Blockchains and their ecosystems are new and evolving – and still the subject of much uncertainty and legal debate. Our assumptions and predictions regarding applications of laws and regulations may prove to be wrong.

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