Whose Turnover Is It — the Exchange’s or Ours? Crypto Trades via CEX and DEX and the VAT Threshold

An analysis of the place of supply when selling crypto-assets through centralised and decentralised platforms, and what it means for annual turnover under Art. 168c of the Bulgarian VAT Act

The starting point: exchanging cryptocurrency is an exempt financial service

In Hedqvist (C-264/14) the Court of Justice of the EU held that exchanging traditional currency for bitcoin and back constitutes a supply of services for consideration within the meaning of Art. 2(1)(c) of Directive 2006/112/EC, and that this supply is exempt under Art. 135(1)(e) – the exemption for transactions in currency, bank notes and coins used as legal tender. In Bulgarian law that provision is transposed in Art. 46(1)(4) VAT Act. In its practice, the National Revenue Agency (NRA) has also classified bitcoin transactions as financial services under Art. 46(1)(3) VAT Act (opinion ref. No. M-24-31-32 of 08.07.2014 of the NRA’s central office).

For the purposes of this analysis, the distinction between items 3 and 4 has no practical significance: in both cases we are dealing with a financial service under Art. 46 VAT Act, and it is precisely this category that is expressly included in annual turnover under the new Art. 168c(1)(3) VAT Act.

The whole analysis below rests on one premise, discussed in detail in my previous article “When Are Securities Transactions an Economic Activity?”: the person must be carrying out an independent economic activity within the meaning of Art. 3(2) VAT Act. If the sales of crypto-assets are the management of a personal portfolio, they fall outside the scope of VAT and the question of accumulating turnover does not arise at all. If, however, the trading is systematic, carried on as an occupation and aimed at earning income from the trading itself, the person is a taxable person and needs to know which of their transactions count towards the €51,130 threshold and which do not.

Why the place of supply decides the threshold question

From 01.01.2026 the threshold for mandatory registration under Art. 96(1) VAT Act is €51,130 of annual turnover in the country, tracked per calendar year under the rules of the new Art. 168c VAT Act (State Gazette issue 115/2025). Annual turnover in the country includes, alongside taxable supplies, supplies of financial services under Art. 46, unless they are ancillary supplies – supplies not connected with the person’s usual economic activity and of a secondary or incidental nature (§ 1(105) of the Supplementary Provisions of the VAT Act). For a professional trader, selling crypto-assets is the activity itself, so the ancillary-supplies exception does not help them.

What is decisive, however, is something else: the threshold is calculated on turnover in the country, i.e. on supplies whose place of supply is in Bulgaria. This follows from the logic of Art. 288 of the Directive as amended by Directive (EU) 2020/285, which distinguishes annual turnover in the Member State concerned from annual turnover in the Union. In a recent opinion of 28.09.2026, the NRA’s “ODOP” Directorate in Plovdiv accepted that services supplied to a taxable person in another Member State have their place of supply outside the country under Art. 21(2) VAT Act and are not included in annual turnover under Art. 168c(1) VAT Act.

So for every single sale of a crypto-asset there is one question: where is the place of supply of this particular supply? And the answer depends entirely on who the recipient is – i.e. who the counterparty to the trade is and what their status is.

There are three applicable rules in the VAT Act:

• Art. 21(2) VAT Act – where the recipient is a taxable person, the place of supply is where the recipient has established its independent economic activity. If the buyer is an exchange established in Ireland, the place of supply is in Ireland.
• Art. 21(1) VAT Act – where the recipient is a non-taxable person, the place of supply is where the supplier has established its business. For a trader established in Bulgaria, that is Bulgaria.
• Art. 21(5) VAT Act – by way of exception, for banking and financial services (item 2(e)) supplied to a non-taxable person established outside the European Union, the place of supply is where the recipient is established.

How we determine the counterparty’s status: Art. 18 of Regulation 282/2011

A supplier can rarely verify the tax status of its buyer. That is why Implementing Regulation (EU) No 282/2011 introduces presumptions that apply directly in all Member States:

• Art. 18(1) – the supplier may regard a recipient established within the Community as a taxable person if the recipient has communicated its VAT identification number and the supplier has confirmed its validity (VIES), or if the supplier has other evidence of that status;
• Art. 18(2) – unless it has information to the contrary, the supplier may regard a recipient established within the Community as a non-taxable person where it can show that the recipient has not communicated a VAT identification number;
• Art. 18(3) – for a recipient established outside the Community, taxable-person status is evidenced by a certificate from the tax authority, by a VAT number or similar identifier, or by any other proof of economic activity.

These three rules are the key to the argument: where we know who the buyer is and that they are a taxable person, the turnover “goes to them”; where the buyer is anonymous and has not given us a VAT number, the turnover stays with us.

CEX: one account, two different contracts

A centralised exchange looks like a single product, but legally it houses two different services, which Regulation (EU) 2023/1114 (MiCA) expressly distinguishes:

• operation of a trading platform for crypto-assets (Art. 3(1)(18) MiCA) – the management of one or more multilateral systems that bring together, or facilitate the bringing together of, multiple third-party buying and selling interests in crypto-assets. That is the order book: the buyer and the seller are clients, not the exchange;
• exchange of crypto-assets for funds or for other crypto-assets (Art. 3(1)(19) and (20) MiCA) – concluding contracts with clients for the purchase or sale of crypto-assets using proprietary capital. Here the exchange is the counterparty.

The separation is reinforced by Art. 76(5) MiCA, under which a provider operating a trading platform may not deal on own account on the platform it operates, including when it provides the exchange of crypto-assets for funds or other crypto-assets. In other words, the regulatory framework itself requires the two channels to be kept apart.

The ESMA register shows this clearly. Kraken was authorised by the Central Bank of Ireland on 25.06.2025 through two separate companies: Payward Global Solutions Limited – solely for operating a trading platform – and Payward Europe Solutions Limited – for custody, exchange for funds and for other crypto-assets, execution of orders on behalf of clients and more, passported to all EEA countries, including Bulgaria.

Channel 1: Instant Sell, Convert and the like – the exchange is the buyer

When a trader hits “Instant Sell” on Kraken or “Convert” on Binance, they are not placing an order on the market. They get a quote from the exchange itself and sell to it. Kraken’s EEA terms provide that for instant buys and sells Kraken acts as principal. Binance’s terms for its Convert service are even more categorical: “Binance is your counterparty on all Conversions”.

In this scenario the buyer is a licensed crypto-asset service provider – a legal entity with an LEI code, entered in a public register, which by definition carries out an economic activity. Its status as a taxable person can be evidenced under Art. 18(1)(b) or Art. 18(3) of Regulation 282/2011. Therefore:

Sale via Instant Sell / Convert → recipient is a taxable person → Art. 21(2) VAT Act → place of supply in the exchange’s country → the supply does not count towards annual turnover in the country under Art. 168c VAT Act.

Two clarifications on Binance. First, Binance has not obtained a MiCA licence – it withdrew its application in Greece on 21.06.2026 and, after the end of the transitional period on 01.07.2026, is restricting its services to EU clients. Second, for trades from earlier periods, what matters is which group company was the counterparty under the terms in force at the date of the trade. If it is established outside the EU, the result is the same – the place of supply is outside Bulgaria, because the recipient is a taxable person (Art. 21(2) VAT Act in conjunction with Art. 18(3) of Regulation 282/2011).

Channel 2: Order book – the buyer is anonymous

With a market or limit order in the order book, the trader’s order is matched against an opposing order from another client. The seller does not know who the buyer is, and the buyer has not communicated a VAT identification number. Under Art. 18(2) of Regulation 282/2011 the supplier may regard such a recipient as a non-taxable person. Therefore:

Sale via order book → anonymous recipient with no VAT number → presumption of a non-taxable person → Art. 21(1) VAT Act → place of supply in Bulgaria → the supply counts towards annual turnover in the country under Art. 168c VAT Act.

There are two caveats to keep in mind here:

• Matched principal and Art. 28 of the Directive. Art. 76(6) MiCA allows the platform to engage in matched principal trading – dealing on own account by matching opposing trades – if the client has consented. In addition, if the exchange executes orders in its own name but on behalf of clients, Art. 28 of the Directive treats the intermediary as having received and supplied the service itself. In both cases the exchange turns out to be the legal counterparty and the trade moves to Channel 1. With Kraken, for example, EEA clients access the platform through Payward Europe Solutions, which is also licensed to execute orders on behalf of clients – so the specific legal mechanism needs to be checked in the terms for the relevant period.
• Sometimes the register gives the answer itself. Some licensed exchanges have no authorisation to operate a trading platform at all. Bybit EU GmbH (Austria), for instance, is licensed for custody, exchange for funds and for other crypto-assets, placing and transfer – but not for operating a platform or executing orders. On such an exchange, even an apparent “order book” can legally function only as an exchange against proprietary capital, i.e. as Channel 1.

DEX: a pool with no owner

Uniswap, SushiSwap, PancakeSwap and similar protocols operate through automated market makers: smart contracts into which liquidity providers (LPs) deposit token pairs, with the price set algorithmically. When a trader swaps a token through the pool, they do not enter into a contract with a legal entity. The protocol developer maintains the interface but is not a party to the swap. The pool itself is code, and the tokens in it belong to anonymous liquidity providers.

Two consequences follow. First, MiCA expressly excludes from its scope crypto-asset services provided in a fully decentralised manner without any intermediary (recital 22) – no licence, no entry in the ESMA register, no identifiable provider. Second, under the VAT Act a taxable person is a person carrying out an independent economic activity (Art. 3(1) VAT Act; Art. 9 of the Directive). A smart contract is not a person. The economic counterparties are the liquidity providers, who are unidentified and have not communicated a VAT number. Therefore:

Swap via DEX → no identified counterparty, no VAT number → Art. 18(2) of Regulation 282/2011 → Art. 21(1) VAT Act → place of supply in Bulgaria → the supply counts towards annual turnover in the country.

The fact that the trader “uses the liquidity pool” does not change the outcome. The pool is not a buyer but technical infrastructure – functionally closer to an order book than to Instant Sell. Economically, a DEX is an order book without an operator.

One note on “crypto-for-crypto” swaps, which are typical on a DEX. Hedqvist concerned exchange against fiat currency; the Court has not ruled expressly on a swap between two crypto-assets. For threshold purposes this does not matter: if the swap is an exempt financial service, it falls under Art. 168c(1)(3); if it is treated as taxable, under item 1. Either way, with the place of supply in Bulgaria, it counts.

A worked example

An individual established in Bulgaria trades systematically, and their activity meets the criteria for an economic activity. In 2026 they make the following sales (in euro):

Annual turnover in the country is €45,000 – below the €51,130 threshold, so no obligation to register under Art. 96(1) VAT Act arises. If the opposite, simplified position is taken – that the entire €87,000 volume is turnover in the country – the threshold is exceeded and the person must file an application within 7 days of the day it was exceeded. The whole difference lies in correctly identifying the recipient of each individual trade.

The weak spots and how to cover them

The argument is defensible, but not risk-free. Here is where the revenue authority would attack, and how to prepare:

• The economic activity. Everything above assumes the person is a taxable person. If they are not, there is no turnover to count – but one cannot argue at the same time that the activity is a personal portfolio and that part of the turnover sits “with the exchange”.
• The legal mechanism of the order book. If the terms show matched principal or execution in the exchange’s own name (Art. 28 of the Directive), the trades are reclassified into Channel 1. This works in the trader’s favour, but requires consistency – the same mechanism cannot be treated differently in different periods without a change in the terms.
• An anonymous buyer outside the EU. The presumption in Art. 18(2) concerns a recipient established within the Community. If the anonymous buyer is outside the EU, Art. 21(5) VAT Act would apply and the place of supply would also be outside the country. The trader cannot prove this, however, so including the order book in turnover is the conservative and consistent approach.
• The evidence. For each period you should keep: the version of the terms in force at the date of the trades; an extract from the ESMA register for the relevant company; its LEI code and a VIES check of its VAT number; exchange statements showing the order type (Instant/Convert versus market/limit). Most exports from tools such as Koinly do not separate these channels automatically and require manual tagging.
• The tax base. A separate, unresolved question is whether turnover is measured by gross sale value or by the net result. In First National Bank of Chicago (C-172/96) the Court held that for foreign-exchange transactions without fees, the taxable amount is the net result of the transactions over a given period. Gross value is the conservative measure for the threshold, but the net-result argument deserves an article of its own.
• Visibility to the NRA. From 2026, crypto-asset service providers report their clients’ transaction data under Directive (EU) 2023/2226 (DAC8). The authority will see total volumes per exchange, with no breakdown by channel – the explanation should be prepared in advance.

Summary

This publication is for information purposes only and does not constitute legal or tax advice. For specific cases I recommend consulting a licensed tax adviser or lawyer.

Sources

• EUR-Lex / CURIA — C-264/14 Hedqvist; C-172/96 First National Bank of Chicago
• Bulgarian VAT Act — Art. 3, Art. 21(1), (2) and (5), Art. 46(1), Art. 96(1), Art. 168c and § 1(105) of the Supplementary Provisions (SG issue 115/2025, in force from 01.01.2026; last amended SG issue 69/2026)
• Implementing Regulation (EU) No 282/2011 — Art. 18
• Regulation (EU) 2023/1114 (MiCA) — Art. 3(1)(18)–(21), Art. 76(5) and (6), recital 22
• ESMA Interim MiCA Register (update of 24.09.2026)
• NRA central office opinion ref. No. M-24-31-32/08.07.2014; opinion of the DODOP Directorate – Plovdiv of 28.09.2026
• Terms and conditions of Kraken (EEA) and Binance (Convert)