A non-fungible token (NFT) is a unique digital code stored on a blockchain. This code is linked to an asset, and its purpose is to be a proof of ownership of the asset.
An NFT is usually linked to a digital object (for example, digital art, music, collectible, game charachter, avatar, etc.), but it can also be linked to a physical asset (for example, art, property, etc.). The range of use for NFTs is steadily growing. All transactions of an NFT is stored on the blockchain.
The Tax Administration considers an NFT to be an asset, and the tax rules are the same as for other virtual assets.
Creating an NFT, often called minting, does not trigger taxation. However, there will be realisation (sale) of any cryptocurrency you have used as payment for the creation. The costs related to the creation will be included in the input value if you later sell the NFT.
You create an NFT and pay ETH 0.05, which amounts to NOK 800 at the time of creation. You have previously paid NOK 500 for the ETH 0.05. This means you have realised the ETH 0.05 with a gain of NOK 300.
All income related to an NFT is generally taxable. You must state income/gain in your tax return. If you have had expenses in connection with your income from NFTs, you may have the right to claim a deduction for them.
Calculation of gain and loss
For tax purposes, the sale of an NFT is a realisation. This means you must calculate your gain or loss from the realisation. The gain or loss is calculated by the difference between the input value and the output value in Norwegian kroner. The output value is the remuneration you receive for the NFT, after you have deducted the transaction costs. The input value will be the cost price, meaning what the NFT has cost you including transaction costs.
There are separate rules for taxation of gains from the realisation of home contents or other movable property (in Norwegian only) that has been used in the owner’s home or household. An NFT will not normally be considered home contents/movable property in this connection, as the NFT in itself is a digital code and not the actual object it is linked to. There may be some cases where an NFT is of such a nature that, following an individual consideration, it could be considered home contents/movable property. If an NFT has been acquired for investment purposes, it will still not fall under the special rules that apply to home contents/movable property.
You sell an NFT at a marketplace for NOK 2,000 and pay NOK 200 in transaction and sales costs. You have previously created or purchased the NFT at a total cost of NOK 800.
Your gain calculation will be as follows:
Sales price NOK 2,000
- Transaction costs NOK 200
- Input value NOK 800
= Gain NOK 1,000
Gain upon resale
The creator/issuer’s or other rightful owner’s income that is a result of the resale of an NFT is taxable. This income is taxable at the time of the resale with the market value of the payment (the payment will usually be made with cryptocurrency). This income can be referred to as “royalty”.
If the sale of an NFT is part of business activity, the income from the sale will be considered business income. The same applies to income upon any resale (royalty). Read more about the term “business activity” in the guide Skatte-ABC (in the chapter “Virksomhet – allment”, in Norwegian only).
You have previously created an NFT and sold it for ETH 1. Upon the creation, a smart contract was prepared. This contract ensures that you’re paid 10 percent of the sales price in the event of a resale. The person who purchased the NFT from you sells it on for ETH 2, which amounts to NOK 60,000 at the time of the sale. You will then be paid ETH 0.2 for the resale. This amounts to NOK 6,000, which is taxable income.
The taxable value of NFTs is included in the basis for net wealth tax.
The value is assessed to be the sales value in Norwegian kroner as at 1 January the year following the income year. You must be able to document the value assessment upon request. If it’s not possible to assess a likely sales value of your NFT, you may enter what you paid for it as the taxable value.
There are separate rules for the taxation of home contents or other movable property (in Norwegian only). An NFT will not normally be considered home contents/movable property in this connection, as the NFT in itself is a digital code and not the actual object it is linked to. There may be some cases where an NFT is of such a nature that, following an individual consideration, it could be considered home contents/movable property. If an NFT has been acquired for investment purposes, it will still not fall under the special rules that apply to home contents/movable property.
You own an NFT that you purchased for ETH 0.10. The estimated sales value on 1 January after the income year is ETH 0.15. The taxable value will then be ETH 0.15, which must be stated in Norwegian kroner in the tax return. This amounts to NOK 4,873. You’ll find the value in Norwegian kroner by multiplying the number of ETH by the exchange rates as at 1 January 2021 for ETH/USD and USD/NOK. In this example, this will be 0.15 X 3,683.05 X 8.82 = 4,873.