The management of digital assets, whether virtual currencies, tokens or NFTs, has become a central concern for individuals and businesses alike. These transactions, which range from simple transfers to incorporations, raise a number of complex legal and tax issues. Far from being a lawless area, this ecosystem is governed by an evolving legal framework, combining ordinary law and special legislation. Understanding these rules is essential for securing transactions and optimising their processing. This technical article sheds light on the rules governing the transfer and contribution of digital assets, exploring the contractual mechanisms and tax implications, a subject that forms part of the broader theme of digital assets: legal challenges and practical solutions.
Transfer of digital assets for valuable consideration
Transfer for consideration covers all transactions in which a digital asset is transferred in return for value. The nature of the consideration is decisive in determining the legal status of the transaction, with distinct contractual and tax consequences.
Selling or exchanging virtual currencies and digital goods
When a digital asset is transferred in exchange for a legal tender (euros, for example), the transaction is a sale. However, if the counterparty is another good, including another digital asset, the transaction is an exchange. This distinction is fundamental. Legally, most crypto-currencies such as Bitcoin are not considered currencies in the legal sense of the term, but intangible personal property. As a result, the acquisition of a property paid for in Bitcoins is analysed, in the absence of precision, as an exchange and not a sale.
In practice, to get around this difficulty and remain within the framework of a sale, contracts may provide that the crypto-currency is used solely as a value reference (currency of account). The price is then denominated in euros, and the crypto-currency is converted at the time of transfer of ownership. Another approach is to insert an alternative obligation clause, giving the purchaser the choice of paying in euros (sale) or transferring the intended digital assets (exchange). Because of the high volatility, a revaluation clause or a mechanism for fixing the price as close as possible to the transaction is essential to balance the contract.
The acquisition of digital assets and unidroit principles
Internationally, the UNIDROIT Principles on Digital Assets and Private Law provide valuable insight. They do not create binding law, but offer a conceptual framework to guide legislators and judges. One of the central concepts is that of "control", defined as the factual capacity to benefit from the asset, to exclude third parties from it and to transfer this control.
These principles lay down a fundamental rule for the security of transactions, inspired by the adage "in matters of movable property, possession is equivalent to title". Principle 8 establishes that a purchaser who obtains control of a digital asset for valuable consideration and without knowledge of the rights of a third party is protected and becomes the rightful owner. This pragmatic approach, based on effective technical control, aims to facilitate exchanges on distributed registries by offering robust protection to the bona fide acquirer.
Real estate tokenisation: issues and procedures
The tokenisation of real estate involves representing a property or rights to it in the form of digital tokens on a blockchain. This technique transforms a traditionally cumbersome and complex real estate transaction into a more liquid and fractional transaction involving movable assets. There are two main methods:
- Tokenisation of company shares : This is currently the most common method. It involves housing the property in a company (a SCI, for example), then issuing tokens representing the company's shares. The sale of the tokens is then equivalent to a sale of shares in the company that owns the property.
- Direct tokenisation of assets : This more innovative approach involves creating tokens that directly represent fractions of the property's ownership. The token holders then become joint owners of the property. This method still raises legal challenges, particularly in terms of land registration and joint ownership management.
In both cases, tokenisation opens the door to a more accessible and potentially more dynamic market, but it requires flawless legal structuring to guarantee investors' rights.
Creating a usufruct or quasi-usufruct over digital assets
Digital assets can be the subject of a dismemberment of ownership, in particular to create a usufruct. The nature of the asset determines the applicable regime. If it is a non-consumable asset, such as an NFT representing a unique work of art, the transaction constitutes a classic usufruct. The usufructuary has the right to use the asset and to receive its fruits (for example, income from the rental of a virtual plot of land), on condition that it is retained and returned to the bare owner at the end of the usufruct.
On the other hand, if the asset is consumable, i.e. it cannot be used without being consumed, such as a crypto-currency, it is referred to as a quasi-usufruct. In this case, the quasi-usufructuary becomes the owner of the digital assets. He or she may spend them, but is required to return, at the end of the period, not the same assets, but their equivalent in quantity and quality, or their estimated value on the day of return. The volatility of crypto-currencies makes this obligation to return assets particularly risky. It is therefore essential to include indexation or floor value clauses in the quasi-usufruct agreement to protect the bare owner.
Transferring digital assets to a company
Bringing digital assets into the capital of a company is an increasingly common operation, whether to finance its development or to house a trading activity in a dedicated structure. Qualifying this contribution is a decisive step.
Contributions in kind or in cash: how should they be classified?
The central question is whether the contribution of a digital asset constitutes a contribution in cash (a sum of money) or a contribution in kind (any other asset). The legal classification of digital assets is essential here. The vast majority of digital assets, including crypto-currencies such as Bitcoin and Ether, are considered to be intangible personal property. Their contribution therefore constitutes a contribution in kind.
This qualification has one major consequence: the obligation to have the contribution valued by a contribution auditor. This is required in SARLs and joint-stock companies (SAS, SA) where the value of the contribution in kind exceeds €30,000 or represents more than half the share capital. The aim is to guarantee the reality and fair value of the contribution in order to protect the other partners and creditors. Valuing these volatile and sometimes illiquid assets is a technical challenge that requires solid expertise, linked to the question of initial asset valuation: determining the fair value of the assets.
One exception could be e-money tokens, which the European MiCA regulation defines as money substitutes. A contribution of such tokens could potentially be classified as a contribution of cash, thereby simplifying the procedure.
Current account 'contributions' to manage volatility
Given the complexity and volatility of contributions in kind, an effective alternative is a shareholder current account advance. Rather than incorporating the digital assets into the capital, the partner "lends" them to the company. Legally, this is not a contribution but a loan, which creates a debt owed by the partner to the company.
This method has several advantages. It avoids the need to appoint a contribution auditor and offers great flexibility. The company can use the cash generated by the sale of the digital assets for its own needs, and the partner can recover his advance according to the agreed terms. To ensure the security of the transaction, it is essential to draw up a shareholder current account agreement setting out the terms of the loan: duration, repayment terms, any remuneration in the form of interest, and above all, the rules for converting and valuing the assets in order to manage the risk of volatility.
Taxation of sales for valuable consideration
The tax regime for capital gains on digital assets has been clarified, but it remains technical and requires particular attention, particularly with regard to the distinction between occasional and professional investors.
The obligation to declare digital assets
Before we look at taxation, it is important to remember the obligation to declare. Under article 1649 bis C of the French General Tax Code, individuals domiciled in France for tax purposes must declare the references of digital asset accounts opened, held, used or closed with entities established abroad. This obligation applies to all non-French trading platforms, which account for the majority of the market. Failure to make this declaration is punishable by fines.
The distinction between non-professional and professional sellers
From 1 January 2023, the tax treatment of capital gains will depend on whether the activity is regular or occasional. For non-professional investors, capital gains on the sale of digital assets are subject by default to the single flat-rate withholding tax (PFU) of 30 %, which breaks down into 12.8 % in income tax and 17.2 % in social security contributions. It is important to note that taxation is only triggered when a digital asset is converted into legal tender (euro, dollar, etc.) or when a good or service is acquired. Exchanges between different digital assets (crypto-to-crypto) are tax deferred.
Taxpayers may, however, opt to be taxed on the progressive scale of income tax if this is more advantageous for them. There is an exemption for disposals where the total annual amount does not exceed €305.
For investors considered to be professionals (because of the frequency, volume and tools used), the system is different. Capital gains are taxed as non-commercial profits (BNC). They are then subject to the progressive scale of income tax, as well as the social security contributions for self-employed workers, which can represent a much higher burden.
The controversial case of nfts taxation
The taxation of non-fungible tokens (NFTs) remains an area of uncertainty. The question is whether an NFT should be treated like any other digital asset, subject to the capital gains regime described above, or whether its tax regime should follow that of its underlying asset. For example, if an NFT is associated with a digital work of art, could the capital gain be subject to the specific regime for transfers of works of art, which provides for a flat-rate tax?
The tax authorities have not yet formally ruled on this question. The most prudent analysis is to consider the nature of the underlying asset. If the NFT merely certifies a physical asset or a work of art, the taxation applicable to that asset should prevail. This uncertainty justifies a case-by-case approach and great caution in reporting such transactions.
The transfer or contribution of digital assets is a complex operation, at the crossroads of contract law, company law and tax law. A mischaracterisation or a poorly drafted clause can have major financial and legal consequences. To ensure the security of your operations and benefit from a tailored strategy in terms of commercial law and digital technologies, contact our firm.
Sources
- Monetary and Financial Code (in particular articles L. 54-10-1, L. 552-2)
- General Tax Code (in particular articles 150 VH bis, 1649 bis C)
- Civil Code (provisions relating to sales, exchanges, loans and contributions to companies)
- Regulation (EU) 2023/1113 of 31 May 2023 on markets in crypto-assets (MiCA)
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