In areas such as STEPN, a new mechanism is introduced which gives NFT (Non Fungible Token) owners the ability to increase the value of their NFT (or level up) by paying cryptocurrency. There is no clear guidance from the National Tax Agency on how to calculate the PNL for this, however, we have consulted our tax advisers and offer the following as one possible way to record it in the ledger
For details on how to create a custom file for buying and selling NFT itself, please refer here.
■How to calculate PNL
The below considers the cryptocurrency paid to level up the NFT as a cost to increase the functionality and the value of the NFT, and processes it as an additional acquisition cost for the NFT concerned.
For example, if you paid 1 ETH to acquire the NFT when 1ETH=300,000JPY, and then paid 1ETH to level up the NFT when 1ETH=350,000JPY, the acquisition cost for this NFT is calculated as 300,000JPY+350,000JPY=650,000JPY.
■How to create the custom file
Please use "LEVELUP" as the action to upload it as an additional acquisition cost to the NFT expressed in a custom coin.
[PLEASE NOTE!] Please note that the only use case supported for the "LEVELUP" action is for leveling up NFTs. Please do not use it for other purposes.
Example 1-1: You have a NFT represented as custom coin ABC in the ledger. You paid 1ETH to level it up.
| Timestamp | Action | Source | Base | Volume | Price | Counter | Fee | FeeCcy |
|---|---|---|---|---|---|---|---|---|
| Transaction date/time | LEVELUP | Optional | USER-ABC | 1 | Blank | ETH | 0 | JPY |
* The above will be processed as selling the cryptocurrency used (1ETH in this case) at the market value. A separate transaction history that sells 1ETH will be auto-created by the system.
[Please Note!] Asof May-2022, even if the Price column is populated with a price, Cryptact processes the LEVELUP incorrectly at 0 JPY. If Cryptact does not have the market value for the coin you used for the LEVELUP, please refer to the next example to add the appropriate JPY amount to the acquisition cost.
For the list of coins Cryptact has prices for, please refer to here.
Example 1-2: You have a NFT represented as custom coin ABC in the ledger. You used cryptocurrency xxx to level it up and Cryptact does not have the market value for xxx. The market value of xxx was 1xxx=1,000JPY.
| Timestamp | Action | Source | Base | Volume | Price | Counter | Fee | FeeCcy |
|---|---|---|---|---|---|---|---|---|
| Transaction date/time | LEVELUP | Optional | USER-ABC | 1000 | Blank | JPY | 0 | JPY |
| Transaction date/time | SELL | Optional | xxx | 1 | 1000 | JPY | 0 | JPY |
* The cryptocurrency payment for LEVELUP was automatically uploaded via wallet address
Currently, it is not possible to link LEVELUP and NFT systematically. Please mark DeFi transaction as "Fee only" to exclude it from the PNL calculation, and upload it separately as described above.
Disclaimer
As stated in the Terms of Use, Cryptact is not responsible for the calculated pnl. In addition, the information provided here is only a tentative description and does not take into account individual circumstances. Cryptact takes no responsibility if the National Tax Agency issues guidance on NFT in the future, which differs from the above. If you have any questions about taxation, please contact your tax advisor.