DAOs: taxation of participation in decentralized organizations

DAOs (Decentralized Autonomous Organizations) are entities governed by smart contracts and governance tokens. Participating in a DAO generates complex tax obligations.

What types of income can a DAO generate?

1. Governance tokens for participation → airdrop/reward.
2. Remuneration for work or services rendered to the DAO → employment income or economic activity income.
3. Share of protocol revenue → de facto dividend or investment income.
4. Grants or bounties → self-employment income.
5. DAO treasury distribution → income from movable capital.

Individual vs. corporate structure

If you participate in a DAO as an individual:

• Income is taxed under your IRPF.
• The nature of the income (employment, capital, economic activity) depends on the specific activity.

If you channel the activity through a Spanish company:

• Income is taxed under Corporate Tax.
• You can deduct related expenses.

For significant participation in DAOs, a corporate structure may be more favorable.

Remuneration for work in a DAO

If the DAO pays you in crypto for developing code, marketing, moderating communities, etc.:

Classification: Employment income (if there is a relationship of dependency) or professional economic activity income (if you are self-employed/freelance).

In practice, most DAO contributors are treated as self-employed.

Double taxation treaty: If the DAO "has no headquarters" in any country, the payments received are taxed exclusively in your country of residence (Spain).

Governance tokens vs. profit-sharing tokens

It is important to distinguish:

• Governance token (pure voting rights): if it has no market value, it might not be declared until the sale.
• Profit-sharing token (allows for collecting a share of protocol revenue): it functions like a dividend and is taxed as income from movable capital upon receipt.

The DAO as a tax entity

DAOs are not recognized legal entities in Spain. However, some taxpayers have tried to argue that the DAO is a foreign entity and that the payments are dividends from an opaque foreign entity.

The AEAT has not issued clear criteria, but the most conservative stance is to declare all DAO income in the period in which it is received.

Conclusion

DAOs are tax-complex precisely because they bypass traditional legal categories. If you actively participate in a DAO and receive significant income, it is worth consulting with a tax advisor specializing in crypto to correctly structure the relationship.