The metaverse continues to exist among us, even though it is AI that is capturing media attention. The concept is evolving, but we continue to speak of digital worlds where it is possible to interact and carry out a multitude of actions. They are also seen as spaces in which organisations and brands can develop their projects and businesses.
We already know that the metaverse includes various technologies, such as Blockchain, cryptocurrencies or generative AI, that are closely related to each other.
Although there is not one single type or classification, metaverses can be classified into centralised or decentralised. In centralised metaverses, there is an entity or platform regulating them and which has information on the users, such as, for example, Meta®, whereas decentralised metaverses are characterised by the assignment of the control to the users, who decide on the future of digital platforms.
In centralised and closed environments, such as Meta®, SecondLife®, Fortnite® or Axie Infinity®, interactions take place within a closed delimited framework where the basic relationship is between the user and the creator of the virtual world.
In contrast, in decentralised and open environments (such as The Sandbox® or Decentraland®), individual interaction and unique experiences taken on significant importance, notwithstanding the fact that there is an initial moment (access registration) which establishes the connection between the real physical/legal person and their avatar (digital identity). This could also be defined as a collective virtual space, created by the convergence of the virtually improved digital and physical reality. In other words, it is independent from the device used and does not belong to one single provider.
It is an independent virtual economy, based on digital currencies and non-fungible tokens (NFT), where technologies such as Blockchain are the protagonists and, in addition, they have a high level of security in the traceability of any operations performed, as well as the transparency and integrity of any data processed, a fact that, in all likelihood, will be used with the Tax Authorities of different countries for controlling and combatting tax fraud.
There are many relevant aspects to be taken into account when regulating the metaverse such as, for example, those relating to intellectual property, contractual relations and their defence, among others.
On a tax level, multiple questions arise, but it should be noted that a large part of the regulating of the “real” world will be applicable, although it will be adapted to these digital platforms.
For example, it will be necessary to define how to tax the sale/purchase of virtual properties, the delivery of virtual courses, the sale of digital content and the implications of direct (Personal/Corporate Income Tax) or indirect (Transfer Tax/VAT) taxes, as well as the place of the provision of any virtual services. All this will imply the need to adapt tax systems to the new business models that the metaverse involves and that any taxation must be related to the legal classification of the operations carried out in the virtual world.
As regards the information to be provided to the Tax Authorities, the main players of centralised (or closed) metaverses will be the entities or platforms supporting them, whereas in decentralised (or open) metaverses, responsibility must lie with the users, who are the ones that will perform the operations that could trigger a taxable event.
We are in the presence of a moment in history in which the digitalisation of the economy, also referred to as Web3, is a new stage of development in the Internet, which will continue (and in fact already is continuing) with the Metaverse, which implies new ways of doing business and creating value in this new virtual economy parallel to the traditional or “real” one.
Finally, it is important to state that co-operation and multilateralism between States, as well as collaboration between the public and private spheres, is the only way of suitably regulating this new digital economy, as well as fighting against tax fraud and money laundering, including in virtual worlds. Thus, those States already working on this must create the appropriate legal frameworks, based on multilateral agreements regulating and promoting these new digital business models, including the metaverse, and guaranteeing security and privacy for users in all the various aspects, naturally including taxation.
What we are convinced of is that the new digital economy is already providing us with great challenged and opportunities and, as always, virtual reality tends to be ahead of regulatory standards.
Lluis Basart from Auren Spain