Taxation beyond the atmosphere and the limits of territoriality.

A company can extract resources from an asteroid, transform them into orbit, and use them to build space structures without the wealth ever reaching Earth.

In such a case, if the economic activity does not depend on the Earth’s surface, on what grounds would the claim to tax be exercised?

Until recently, such a question might have seemed straight out of science fiction, but today it has become a concrete issue with the expansion of the Space Economy. As outer space ceases to be a predominantly scientific and institutional domain and becomes an environment for production, resource exploration, and service provision, the traditional categories of Tax Law face a challenge that goes beyond adapting their rules: identifying the links that legitimize the exercise of the power to tax.

In this context, we find the work Taxing the Space: La Fiscalità Oltre L’Atmosfera, Tra Diritto Tributario, Governance Globale e Sostenibilità, the result of research conducted in Italy as part of the Ecosystem of Innovation for Next Generation Sardinia (E.INS) project . The work examines how legal instruments designed for an essentially terrestrial economy can respond to new forms of wealth generation beyond the atmosphere.

The economic dimension of this transformation helps to understand the urgency of the debate. Growth projections for the space sector point to a market that, according to Euroconsult, will reach US$642 billion by 2030—a 74% increase compared to post-pandemic levels. Bank of America estimates project an even more ambitious trajectory: US$1.4 trillion over the same time horizon, with annual growth of 10.6%, a size comparable to the entire global tourism sector.

The proliferation of megaconstellations of satellites, navigation systems, and Earth observation services demonstrates that exploration is progressively integrated into the economic strategies of private companies and global value chains, such that outer space is becoming a new frontier of economic activity.
Insufficiency of traditional tax connection criteria

The problem does not lie in the difficulty of adapting tax rules to new technologies, but rather in the fact that the growth of space-based economic activities calls into question one of the historical premises of the power to tax: the possibility of linking taxable wealth to a territory under the jurisdiction of a particular State. On Earth, such a link is identified through physical or personal elements, such as the location of an establishment, the place where a service is provided, the payer, or the taxpayer’s tax residence. These criteria apply to satellite telecommunications services (Satcom), whose economic chain involves ground stations, operators, clients, and users located in identifiable jurisdictions.

The difficulty arises when operations occur autonomously and entirely in Earth orbit or on celestial bodies. Three segments illustrate this change: Space Mining , Space Manufacturing , and In-Orbit Servicing (dedicated to the operation of maintenance, repair, refueling, and extending the lifespan of space artifacts).

Space mining allows us to clearly visualize the scale of the challenge. Among the possibilities are the extraction of water on the Moon and the exploration of asteroids containing metals of high economic value, including elements of the platinum group, as well as nickel and cobalt. With the development of treatment and refining systems installed in outer space itself, these resources could return to Earth as relevant raw materials for batteries, semiconductors, and catalysts, or be used in the construction of space infrastructure.

In the second scenario, iron and nickel extracted from celestial bodies could serve as inputs for additive manufacturing – three-dimensional printing – of antennas, platforms, station modules, and other orbital structures. Local production would reduce dependence on terrestrial launches, which are currently associated with high costs and considerable technical limitations. The extracted wealth would therefore not need to enter the terrestrial circuit to acquire utility and value.

A similar revolution is occurring in orbital manufacturing. 3D bioprinting of tissues and biological materials under microgravity conditions is a potential avenue for developing medical applications and improving certain production processes. Experiments conducted in space fuel research into the formation of complex tissues and potential future applications in terrestrial medicine. At the same time, technologies of this nature can contribute to the medical autonomy of long-duration human missions, including those destined for Mars.

These examples do not mean that all of these activities have already achieved large-scale commercial viability, but they do reveal the direction of a technological transformation that Tax Law needs to consider before economic models become consolidated without adequate legal parameters.

How, for example, can one tax wealth obtained from an asteroid, transformed by three-dimensional printers in orbit and consumed by a private space station, if the material elements of the operation are not clearly connected to a terrestrial jurisdiction? The problem is not limited to the location of the taxable event; it also involves the identification of the taxpayer, the legal classification of the operation, the determination of the tax base, and the distribution of tax jurisdiction among potentially interested states.

The obstacle is reinforced by Article II of the 1967 Outer Space Treaty, which prohibits the appropriation of outer space, the Moon, and other celestial bodies by claiming sovereignty, use, occupation, or any other means. This does not mean that space is devoid of all forms of regulation. The legal regime for space contemplates state responsibilities and obligations related to activities carried out by public and private entities, but the tax issue requires a more precise analysis: it is not a matter of asserting the absolute non-existence of state jurisdiction, but of recognizing that the absence of territorial sovereignty over space renders traditional criteria for fiscal connection insufficient in certain situations.
Spatial operational endowment as a new manifestation of contributory capacity

From now on, the discussion reaches the fundamentals of taxation. Terrestrial industrial activity develops within a legal framework with protective infrastructure and regulated markets. Space operations, in turn, require significant technological investments, face high risks, depend on complex logistics chains, and are subject to long payback cycles. Furthermore, they may involve resources located in an environment that is not subject to the territorial sovereignty of any State.

This difference does not automatically authorize the creation of a new tax, but it does allow us to raise a question of fiscal justice: are traditional indicators of ability to pay sufficient to represent the economic advantage of those who have the financial, technological, and organizational means necessary to access the space and maintain an operational structure there?

The proposed hypothesis is that operational space endowment can constitute a specific manifestation of contributory capacity. The expression designates the qualified economic position of the operator who possesses real and concrete conditions to access outer space and maintain productive structures in operation.

The mere presence of equipment in orbit does not necessarily demonstrate taxable wealth, just as the high cost of a mission does not mean that its operator has net economic capacity. A structure may be in an experimental phase, incur losses, or fulfill a scientific purpose without commercial exploitation. Therefore, any taxation model based on space operational endowment needs to establish criteria capable of distinguishing effective economic capacity from situations of risk, research, or non-profit activity.

The proposal involves discussing the establishment of a specific tax, the In-Orbit Capital Operating Satellite Tax (ICOS) , whose taxable event is triggered by the maintenance of an authorized operational space infrastructure. The tax does not apply to hypothetical wealth, but to the manifested and economically organized economic differential. Instead of taking profit or revenue as the sole indicators, the model would seek to identify an economic advantage associated with the effective availability of technology, active infrastructure, and organizational resources in orbit.

In this context, it is proposed that the basis for calculating the ICOs be based on a technical and regulatory parameter called the VCOS index (Value of In-Orbit Spatial Capital), which can combine objectively verifiable variables such as installed operational capacity, technical characteristics of equipment, proven infrastructure investment costs, the economic function of the structure, and telemetry data related to its foundation. Registrations with competent authorities can also contribute to the identification and monitoring of operations.

The useful mass of orbiting equipment can be part of the technical evaluation, but it should not function in isolation as a measure of wealth. Equipment of similar mass can have radically different functions, costs, production capacities, and economic values. The index requires transparent weighting of variables and criteria for periodic updating, as well as audit and review mechanisms.

Practicality must also be reconciled with economic neutrality and the encouragement of innovation. A tax levied on operational structures could affect companies in the development phase or ventures with uncertain returns. An alternative would be to provide for differentiated treatment, limits on incidence, or deductions related to qualified investments in research and development (R&D), provided they are defined by objective criteria compatible with the purpose of the tax. The full deduction of these costs, as proposed, deserves specific evaluation regarding its effects on the tax base and the prevention of abusive tax planning.
Space sustainability: in-orbit servicing and environmental taxation

The expansion of space activity intensifies the need to preserve a safe and usable orbital environment. The growing number of satellites, coupled with the presence of rocket fragments, deactivated equipment, and debris resulting from collisions, increases the risks to operational missions and the continuity of space activities.

Space debris travels at high speeds, potentially damaging operational satellites and increasing the costs of protecting and replacing equipment. The accumulation of debris therefore represents not only a technical problem, but also an economic and governance issue.

In this context, the in-orbit servicing segment gains relevance , encompassing maintenance, repair, refueling, satellite life extension, and guided removal of obsolete artifacts. By allowing certain equipment to be repaired or used for longer periods, these services can reduce the need for frequent replacements, helping to limit the formation of new debris.

The proposed Space Environmental Tax is based on the polluter-pays principle and seeks to link economic consequences to behaviors that increase the risk of generating orbital debris. Among the scenarios to be examined are the abandonment of equipment at the end of its useful life, non-compliance with deorbiting plans, and the absence of mitigation measures previously required by applicable regulations.

However, configuring this instrument would require distinguishing between a tax levy and administrative sanctions, regulatory obligations, and financial guarantee mechanisms. The levy should not depend on a generic notion of environmentally inappropriate behavior, but on clear legal criteria related to identifiable risks or impacts. It would also be necessary to consider the responsibility of operators, causality, the difficulties of enforcement, and coordination with international regimes applicable to space activities.

In addition, legislation can grant tax incentives to operators who adopt environmentally virtuous behaviors—such as the use of clean decoupling systems, ecodesign of satellites, and contracting in-orbit maintenance services to prevent the formation of new debris. In this way, environmental taxation assumes a safeguarding role, guaranteeing the long-term sustainability of Earth’s orbits and preserving space infrastructure for future generations.
Urgent need for a Space Tax Convention

Finally, it should be considered that the complexity and transnationality of the Space Economy make it particularly difficult to respond to these challenges through isolated fiscal initiatives, requiring broad diplomatic consensus, which makes the negotiation of a specific multilateral treaty imperative: the Space Tax Convention, whose central objectives would be: to establish uniform parameters to harmonize the tax incidence on space activities; to standardize the application of the VCOS Index and environmental taxes, guaranteeing fair competition between private corporations and global space agencies; to create transparent rules for the distribution of revenue generated by space activities, directing part of the resources to finance the global governance of space, the preservation of the orbital environment and scientific development in developing countries, in line with the spirit of the 1967 Outer Space Treaty; as well as to create specialized arbitration bodies to resolve tax disputes arising from multilateral operations in space.

The transformation of space exploration into a multi-billion dollar market no longer allows the law to remain inert: guaranteeing the legal soundness, fiscal equity, and environmental sustainability of space missions is the challenge at hand, and it is up to the international community to articulate the normative instruments so that space exploration continues to drive the scientific and technological advancement of humanity, under the guidance of tax justice and global governance.

SCAPIN, AC Taxing the Space: Taxation Beyond the Atmosphere, Between Tax Law, Global Governance, and Sustainability, Aracne, Rome, 2026.

Andreia Cristina Scapin
is a professor of Tax Law at the University of Teramo (Italy) and a partner at the law firm Ventura e Scapin Advogados.

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