In its decision published on 28 February 2025, the Italian Court of Cassation, Criminal Section, ruled on the case involving the sale of non-fungible tokens (NFTs), where the consideration for the sale was received in cryptocurrency Ether. The court concluded that the seller should have reported in his tax returns the Ethers received.
The appellant in the case, Leopoldo D’Angelo, better known by the pseudonym Dangiuz, has sold NFTs related to his digital works of art (cyber graphics) and received cryptocurrency Ether in consideration for the transfer. D’Angelo advanced two arguments for the claim that the income from the transaction was not taxable. Both arguments failed.
Firstly, according to the appellant, no marketing of intellectual works took place. NFT, as the object of the sale transaction, was not, in the opinion of D’Angelo, a digital work of art, but a digital certificate that certifies ownership of the work and digital authenticity. Therefore, D’Angelo maintained, income derived from the transfer of NFT could not be regarded as income from economic use of intellectual property (works of mind, opere dell’ ingegno), which includes works of art.
The court held that NFTs in question were instruments representing works of art, i.e. “incorporating” (albeit virtually) all of its characteristics and specificities. The transfers of NFTs represented a form of economic use of such works of art. The court compared NFTs to a digital medium on which a piece of music is reproduced.
Secondly, the appellant maintained that, although the value of the transaction was credited to his account, there was no taxable income involved. The value of the transaction was expressed in a cryptocurrency (Ether, traded on the Ethereum platform), and Ether was not converted into money.
The court held that cryptocurrency (in this case Ether) is a synonym for “virtual currency”, which was defined in Italian law as a “digital value that is not issued or guaranteed by a central bank or a public body, is not necessarily linked to a legally established currency and does not have the legal status of currency or money, but is accepted by natural or legal persons as a means of exchange, and which can be transferred, stored and exchanged electronically”. The court concluded that the cryptocurrency in question is an asset of value, which can be expressed in a monetary amount. In other words, cryptocurrency is an income earned not in money, but in kind, and therefore, constitutes a taxable income. The Ether credited to an account has a market and therefore has a value. It can be converted into “real” money. For that reason, Ethers received (credited to the account) should have been reported by the taxpayer in his tax returns.
The question of valuation of Ether was separate – the court acknowledged that there is a high volatility of the market of cryptocurrencies, but that is not an obstacle to treating it as an income in-kind.
