Tokenization of fractional ownership and tax implications: current issues and case study

Abstract

Asset tokenization is a revolutionary concept that is transforming the ownership of tangible and intangible assets by converting rights over digital or physical assets into tokens recorded on a blockchain. This research investigates the tax ramifications and regulatory challenges associated with the tokenization of assets concerning fractional ownership, with a specific focus on vessels, aircraft, real estate, and works of art. Using both qualitative and quantitative methods, the study examines legal documents and transaction data involving tokens. Tokenization facilitates greater transparency and liquidity, democratizes access to investments, but presents regulatory and compliance challenges. The research emphasizes the need to amend current legislation to address the complexities introduced by fractional ownership through tokens. The legal analysis demonstrates that tokenization requires strong regulatory support to ensure legal certainty, despite the advantages it offers. The case study of Condomínio Viverde serves as an illustration of the viability of tokenization in the real estate sector in Brazil, highlighting the importance of a well-defined legal framework. The results suggest that tokenization has the potential to revolutionize financial markets; however, its full implementation requires continuous adjustments to legal and tax frameworks. This research contributes to the existing body of knowledge by providing legislators, regulators, investors, and legal professionals with significant insights. It underscores the importance of monitoring global practices and raising awareness of the advantages and disadvantages of tokenization.