Currencies in video games and the VAT issue – Opinion of the Advocate General

Gold all doth lure, Gold doth secure all things. Alas, we poor! – wrote a German poet long ago. Today, this line acquires a new meaning, as gold itself becomes the subject of a tax dispute. Except this time, the case is not about bullion or coins, but about “gold” from an online computer game.

The case C-472/24 (“Žaidimų valiuta” MB v. Valstybinė mokesčių inspekcija prie Lietuvos Respublikos finansų ministerijos), analysed by Advocate General Juliane Kokott, illustrates how far VAT legislation has to catch up with the realities of the modern digital economy.

Background of the Case

A Lithuanian entrepreneur engaged in the business of buying and selling virtual in-game “gold.” Players could use it to purchase items, upgrades, or access to events within the game. The business was rather profitable, with annual revenues reaching several hundred thousand euros.

The tax authority, however, ruled that the company should have charged VAT on the sales. Since it had not done so, an assessment was issued for arrears exceeding EUR 46,000.

In challenging this decision before the tax dispute commission, the entrepreneur argued:

1. The transactions should be exempt from VAT as currency exchange operations (Article 135(1)(e) of the VAT Directive),
2. The “gold” could be treated as a multi-purpose voucher (MPV), taxable only at the time of redemption,
3. In the alternative, VAT should be calculated only on the margin, i.e., the difference between purchase and resale prices, not on the full transaction value.

Does In-Game “Gold” Qualify as Currency?

The Court of Justice has previously dealt with the classification of the most well-known cryptocurrency, bitcoin, as a means of payment within the meaning of Article 135(1)(e) of the VAT Directive, which provides:

Member States shall exempt the following transactions:
(…)
(e) transactions, including negotiation, concerning currency, bank notes and coins used as legal tender, with the exception of collectors’ items, that is to say, gold, silver or other metal coins or bank notes which are not normally used as legal tender or coins of numismatic interest;

In the Hedqvist case (C-264/14), the Court concluded that cryptocurrencies may serve as a means of payment, because restricting the provision to traditional currencies would undermine the objective of the exemption.

As a result, bitcoin constitutes a contractual means of payment used by parties for payments, including the settlement of obligations. By its nature, it is a virtual currency with a two-way flow – it can be both purchased and exchanged for other means of payment. The Advocate General also highlighted this feature. Two-way flow means the free ability to purchase and to exchange for other payment instruments.

In the literature, the classification of virtual currency in the colloquial sense (which should not be confused with the statutory definition of “virtual currency” under the AML Directive) is determined both by the aspect of cryptographic encryption (see J. Czarnecki Nie tylko bitcoin, czyli rodzaje walut wirtualnych, 2014) and by the institutional aspect of virtual currency, namely whether it is issued or governed by a centralised or decentralised entity – a distinction also emphasised by the American scholar Prof. Girasa in his publication[1]. Ultimately, however, the most common classification is based on the criterion of flow/exchangeability, which may take the following forms:

1. Closed-loop currencies – in the case of currencies occurring in games, this flow is understood both as the impossibility of purchasing a given asset and its further exchange into another means of payment in general circulation. An example is gold in the game World of Warcraft. It functions exclusively within the game world, and any potential transfers of it between users for money do not take place in an official manner[2]. Therefore, it cannot be attributed the key feature of currency, namely exchangeability.
2. Virtual currencies with unidirectional flow– identified primarily with the possibility of purchasing the currency with legal means of payment (often determined in advance by the game developer) and using it within the closed circulation of the game world. Conversely, another variant would be the possibility of exchanging an asset acquired in the game exclusively for means of payment outside the game. Generally, however, due to the limited possibility of further exchange of the asset, one-way flow currencies are not regarded as a full form of virtual currencies in the legal sense[3].
3. Virtual currencies with bidirectional flow – which may be both bought and sold directly against fiat currencies, such as bitcoin.

This classification was already presented by the ECB in ‘Virtual Currency Schemes’ in 2012[4].

Against this backdrop, in-game “gold” is clearly not equivalent to bitcoin. It functions solely within the game, cannot be used to pay for goods in a store or online (outside the game), and thus does not operate as a means of payment in the conventional sense. Based on the facts, it definitely can’t  be currency with bidirectional flow and “gold” cannot be treated as “currency” under Article 135 of the VAT Directive.

The Advocate General explicitly noted that the concept of “a means of payment accepted by the parties” may, at most, extend to virtual currencies that, like bitcoin, are contractually recognised as direct means of payment between economic operators and whose sole function is to serve as such. This does not apply to in-game “gold,” which is usable only within the game environment.

Even if in-game currency appears to function like money within the game, its use cannot be equated with currencies operating in real-world economic transactions.

Can In-Game Gold Be Treated as a Voucher?

The second line of defence was to classify “gold” as a multi-purpose voucher (MPV). For this to apply, two substantive conditions must be met:

1. The goods to be supplied or the potential supplier must be apparent from the voucher or its terms and conditions – which, according to the Advocate General, was not the case for in-game gold.
2. “Gold” would have to give rise to the obligation to accept it as consideration for a service. However, in-game gold itself is already an electronic service, as it provides an immediate advantage and utility within the game, not merely a right to acquire something in the future.

This is a decisive distinction: vouchers relate to the future provision of goods or services, whereas the acquisition of in-game gold constitutes a completed service at the time of purchase.

What About the Margin Scheme?

The entrepreneur also invoked the margin scheme. In his view, trading in virtual in-game gold should be treated analogously to trading in second-hand goods, with VAT charged only on the margin (the difference between purchase and resale prices).

The Advocate General analysed this issue from linguistic, historical, and teleological perspectives:

• Linguistic/wording interpretation: Articles 311 et seq. of the VAT Directive explicitly refer to “second-hand goods, works of art, collectors’ items and antiques.” The use of the term “goods” excludes services, whereas virtual gold should be regarded as an electronic service rather than a tangible good.
• Historical interpretation: The margin scheme was designed to avoid double taxation on goods purchased from consumers and resold. At the time of adoption, the EU legislature did not envisage the trade in digital in-game items. Extending the scheme to electronic services has no basis in the original legislative intent.
• Teleological interpretation: The purpose of the margin scheme is to maintain competitive neutrality between businesses and private individuals. From this perspective, trading in in-game gold does resemble second-hand goods trading: the asset is purchased from private individuals (who do not charge VAT) and resold to other users. The Advocate General emphasised that restricting the scheme to tangible goods appears unjustified. The principle of equal treatment favours an expansive interpretation, allowing such services to fall within the margin scheme.

Conclusion

To summarise:

• In-game gold, exchangeable only within the game environment, does not qualify as a currency or means of payment under Article 135(1)(e) of the VAT Directive, unlike bitcoin.
• It cannot be treated as a multi-purpose voucher either, since its purchase already constitutes an immediately consumable electronic service.
• Finally, Article 311(1)(1) of the VAT Directive, in light of technological developments, should be interpreted teleologically in a broader manner. This could extend the margin scheme to transferable intangible assets, provided they circulate in legal commerce similarly to goods – particularly as such services, like second-hand goods, are primarily traded on secondary markets.

Ultimately, the key question remains: in its forthcoming judgment, will the CJEU follow the Advocate General’s opinion and endorse a broader reading of the margin scheme, or will it take a different stance – for example, by recognising in-game “gold” as a form of payment?

[1] R. Girasa Regulation of Cryptocurrencies and Blockchain Technologies, New York 2018, s.9.

[2] J. Ryfa, Waluty wirtualne – problem zdefiniowanie i klasyfikacji nowego środka płatniczego, Poznań 2014, s. 144.

[3] Ibidem.

[4] ECB, Virtual Currency Schemes, Frankfurt 2012, p.5. ISBN: 978-92-899-0862-7