Summary

This article written by Manish Bansal of Dhruva Consultants explores the rise of Non-Fungible Tokens (NFTs) and their growing relevance in Saudi Arabia, particularly from a legal and tax perspective. While NFTs are reshaping digital ownership worldwide, their regulatory treatment in the Kingdom remains uncertain, falling into a grey area under existing frameworks.

Analysis

In recent years, Non-Fungible Tokens (NFTs) have taken the digital world by storm. From digital art and music to virtual real estate and gaming assets, NFTs have created a new paradigm for ownership and value in the digital economy. Global brands, artists, and investors are increasingly embracing NFTs, driving billions of dollars in transactions and reshaping how we think about digital property.

As this innovation spreads, countries around the world — including Saudi Arabia — are beginning to assess how NFTs fit within their existing legal and tax frameworks.

What Are NFTs?

Non-Fungible Tokens (NFTs) are unique digital assets that represent ownership of a specific item or piece of content — such as digital art, music, videos, or virtual real estate — recorded on a blockchain. Unlike cryptocurrencies, NFTs are noninterchangeable and are typically used to prove authenticity and ownership of digital or tokenized physical assets.

How are NFTs bought & sold?

NFTs are bought and sold through an online marketplace such as OpenSea, Rarible and SuperRare. The consideration is usually
paid in the form of cryptos such as Ethereum. Off marketplace transactions, i.e., direct transaction between a buyer and a seller can also happen without involving a marketplace. The seller may list NFTs on its personal or business website. A typical lifecycle for NFT looks like this:

Legal and Regulatory Landscape in Saudi Arabia

As of now, NFTs are not explicitly regulated in Saudi Arabia. While the Saudi Central Bank (SAMA) and Ministry of Finance have issued warnings against dealing in virtual currencies, these statements do not directly address NFTs (Since NFTs are typically not used as a medium of exchange, they are not treated as cryptocurrencies). These factors result in NFTs falling into a regulatory grey zone.

The Electronic Transactions Law, issued by Ministry of Communications and Information Technology (MCIT), under Royal Decree No. M/18, provides a legal framework for digital transactions and signatures. It recognizes the validity and enforceability of electronic records and contracts, provided they meet certain technical and procedural standards. In our view, this law supports the legal recognition of NFT transactions, especially when:

• NFTs are bought or sold via electronic platforms.
• Transactions are supported by electronic signatures and digital certificates.
• Records are stored and retrievable in a secure and verifiable format.

Thus, while NFTs are not explicitly mentioned, the law potentially provides a foundation for their legal enforceability in commercial contexts.

Further, SAMA’s Regulatory Sandbox and SAMA/MCIT’s support for blockchain technologies signal a growing openness to blockchain innovations. However, formal licensing or oversight for NFT platforms is still pending.

VAT Treatment of NFTs in Saudi Arabia
Classification of NFTs – Good or services

NFTs do not transfer ownership rights in respect of any physical goods instead it gives the ‘right to use’ a digital asset Thus, for VAT purposes, the transfer of NFTs may be considered as services and not supply of goods. Although ZATCA has not issued NFT-specific VAT guidance, NFTs are likely to be treated as electronic services.
Important to note that the Spanish Tax Administration ruled that the transaction in NFTs is a supply of electronically supplied services.

Under UAE VAT legislation, virtual assets have been specifically defined as a digital value that can be traded or transferred digitally, and may be used for investment purposes, and do not include digital representations of paper currencies or securities. In our view NFTs should qualify as virtual assets. Transfer and conversion of NFTs is treated as exempt financial services under UAE VAT.

Management and custody services related to NFTs may be subject to VAT or exempt, depending on whether fees are charged explicitly or implicitly.

NFT Transactions and VAT thereon

The NFT ecosystem involves a variety of transactions, each carrying distinct VAT consequences under Saudi Arabia’s VAT framework.

• Creation or mining of NFTs – Not regarded as a taxable event, since no supply is involved at the stage of development, such activity falls outside the scope of VAT.
• Sale of NFTs – Sale of NFTs could potentially be exempt as a supply of financial services or be taxable as a supply of electronic services based on the place of actual use and enjoyment. Based on the current Saudi VAT framework, it is likely that the sale of NFTs should be treated as electronically supplied services. Resale of NFTs in secondary market
  should also be subject to VAT.
• Royalties – Creators can capitalize on NFTs by licensing rights for merchandising or by earning royalties on subsequent sales. Such royalty is likely to be taxable.
• Resale by persons not carrying on an economic activity – Typically, VAT does not apply to persons not carrying on an economic activity. Therefore, where there is a sale in the secondary market by any such person, it should be out of scope of VAT. Having said that where the sale value exceeds SAR 375,000 – there could be potential exposure for such person, particularly where such person undertaken such buy and sale of NFTs frequently.
• Purchase of NFTs – Where the buyer is a KSA resident, while the seller is a non-resident, the KSA buyer would need to account for VAT under reverse charge mechanism.
• NFT marketplace – The listing fees and commission received by NFT marketplace on the sale of NFTs could be considered as a taxable activity. However, if the management of NFTs is considered as financial services (as is the case in the UAE), then VAT treatment would depend upon the general tax treatment for financial services and thus may either be subject to 15% VAT or exempt, depending on whether or not consideration for the services is charged in the form of an explicit fee or commission.

Further from January 2026, online marketplaces (OMPs), i.e., online interfaces or portals acting as intermediaries for nonresident suppliers, may be treated as taxable persons for VAT purpose, in which case, the OMPs would be required to collect and remit VAT on the supplies to KSA residents.

Other key considerations

• Input tax recoverability – The input tax recovery will depend upon the classification of the NFTs. Where the NFTs are subject to VAT (0% or 15%), input VAT should be recoverable. On the other hand, if they are treated as exempt financial services, then input tax would be restricted.
• Zero-rated treatment – It is important to note that any financial services (although exempt), may qualify for zero-rating provided subject to fulfilment of prescribed conditions. Input tax incurred on such zero-rated supplies can be recovered.
• Reverse Charge: Cross border transactions may trigger RCM obligations.

NFTs are gaining traction globally. In Saudi Arabia, while the legal and tax frameworks are still evolving, businesses and individuals engaging in NFT transactions should be aware of the potential VAT implications and ensure they remain compliant with existing laws.

As the Kingdom continues to embrace digital innovation, clearer regulatory guidance on NFTs is expected — but until then the taxpayers are advised to tread with caution and be proactive with their compliance obligations.