diff --git a/packages/zevm-app-contracts/contracts/xp-nft/xpNFT.sol b/packages/zevm-app-contracts/contracts/xp-nft/xpNFT.sol
index 78adff7..04db04e 100644
--- a/packages/zevm-app-contracts/contracts/xp-nft/xpNFT.sol
+++ b/packages/zevm-app-contracts/contracts/xp-nft/xpNFT.sol
@@ -153,7 +153,7 @@ contract ZetaXP is ERC721Upgradeable, Ownable2StepUpgradeable, EIP712Upgradeable
         emit NFTUpdated(owner, tokenId, updateData.tag);
     }
 
-    function _transfer(address from, address to, uint256 tokenId) internal override {
+    function _transfer(address from, address to, uint256 tokenId) internal virtual override {
         revert TransferNotAllowed();
     }
 }
diff --git a/packages/zevm-app-contracts/contracts/xp-nft/xpNFT_V2.sol b/packages/zevm-app-contracts/contracts/xp-nft/xpNFT_V2.sol
index c2c2ce5..81628af 100644
--- a/packages/zevm-app-contracts/contracts/xp-nft/xpNFT_V2.sol
+++ b/packages/zevm-app-contracts/contracts/xp-nft/xpNFT_V2.sol
@@ -20,7 +20,7 @@ contract ZetaXP_V2 is ZetaXP {
     // Event for Level Set
     event LevelSet(address indexed sender, uint256 indexed tokenId, uint256 level);
 
-    function version() public pure override returns (string memory) {
+    function version() public pure virtual override returns (string memory) {
         return "2.0.0";
     }
 
diff --git a/packages/zevm-app-contracts/contracts/xp-nft/xpNFT_V3.sol b/packages/zevm-app-contracts/contracts/xp-nft/xpNFT_V3.sol
new file mode 100644
index 0000000..2f5c6a9
--- /dev/null
+++ b/packages/zevm-app-contracts/contracts/xp-nft/xpNFT_V3.sol
@@ -0,0 +1,41 @@
+// SPDX-License-Identifier: MIT
+pragma solidity ^0.8.20;
+
+import "./xpNFT_V2.sol";
+
+contract ZetaXP_V3 is ZetaXP_V2 {
+    event TagUpdated(address indexed sender, uint256 indexed tokenId, bytes32 tag);
+
+    function version() public pure override returns (string memory) {
+        return "3.0.0";
+    }
+
+    function _transfer(address from, address to, uint256 tokenId) internal override {
+        bytes32 tag = tagByTokenId[tokenId];
+        if (tag != 0) {
+            tokenByUserTag[from][tag] = 0;
+        }
+        if (tokenByUserTag[to][tag] == 0) {
+            tokenByUserTag[to][tag] = tokenId;
+        }
+        ERC721Upgradeable._transfer(from, to, tokenId);
+    }
+
+    function moveTagToToken(uint256 tokenId, bytes32 tag) external {
+        uint256 currentTokenId = tokenByUserTag[msg.sender][tag];
+        address owner = ownerOf(tokenId);
+        if (owner != msg.sender) {
+            revert TransferNotAllowed();
+        }
+        if (currentTokenId == tokenId) {
+            return;
+        }
+        if (currentTokenId != 0) {
+            tagByTokenId[currentTokenId] = 0;
+        }
+
+        tagByTokenId[tokenId] = tag;
+        tokenByUserTag[msg.sender][tag] = tokenId;
+        emit TagUpdated(msg.sender, tokenId, tag);
+    }
+}
diff --git a/packages/zevm-app-contracts/test/xp-nft/xp-nft-v3.ts b/packages/zevm-app-contracts/test/xp-nft/xp-nft-v3.ts
new file mode 100644
index 0000000..1b59d5b
--- /dev/null
+++ b/packages/zevm-app-contracts/test/xp-nft/xp-nft-v3.ts
@@ -0,0 +1,114 @@
+import { SignerWithAddress } from "@nomiclabs/hardhat-ethers/signers";
+import { expect } from "chai";
+import { ethers, upgrades } from "hardhat";
+
+import { ZetaXP_V3 } from "../../typechain-types";
+import { getSignature, NFT, NFTSigned } from "./test.helpers";
+
+const ZETA_BASE_URL = "https://api.zetachain.io/nft/";
+const HARDHAT_CHAIN_ID = 1337;
+
+const encodeTag = (tag: string) => ethers.utils.keccak256(ethers.utils.defaultAbiCoder.encode(["string"], [tag]));
+
+const getTokenIdFromRecipient = (receipt: any): number => {
+  //@ts-ignore
+  return receipt.events[0].args?.tokenId;
+};
+
+describe("XP NFT V3 Contract test", () => {
+  let zetaXP: ZetaXP_V3, signer: SignerWithAddress, user: SignerWithAddress, addrs: SignerWithAddress[];
+  let sampleNFT: NFT;
+
+  beforeEach(async () => {
+    [signer, user, ...addrs] = await ethers.getSigners();
+    const zetaXPFactory = await ethers.getContractFactory("ZetaXP");
+
+    zetaXP = await upgrades.deployProxy(zetaXPFactory, [
+      "ZETA NFT",
+      "ZNFT",
+      ZETA_BASE_URL,
+      signer.address,
+      signer.address,
+    ]);
+
+    await zetaXP.deployed();
+
+    const ZetaXPFactory = await ethers.getContractFactory("ZetaXP_V3");
+    zetaXP = await upgrades.upgradeProxy(zetaXP.address, ZetaXPFactory);
+
+    const tag = encodeTag("XP_NFT");
+
+    sampleNFT = {
+      tag,
+      to: user.address,
+      tokenId: undefined,
+    };
+  });
+
+  const mintNFT = async (nft: NFT) => {
+    const currentBlock = await ethers.provider.getBlock("latest");
+    const sigTimestamp = currentBlock.timestamp;
+    const signatureExpiration = sigTimestamp + 1000;
+
+    const signature = await getSignature(
+      HARDHAT_CHAIN_ID,
+      zetaXP.address,
+      signer,
+      signatureExpiration,
+      sigTimestamp,
+      nft.to,
+      nft
+    );
+
+    const nftParams: NFTSigned = {
+      ...nft,
+      sigTimestamp,
+      signature,
+      signatureExpiration,
+    } as NFTSigned;
+
+    const tx = await zetaXP.mintNFT(nftParams);
+    const receipt = await tx.wait();
+    return getTokenIdFromRecipient(receipt);
+  };
+
+  it("Should transfer successfully", async () => {
+    const user2 = addrs[0];
+    const sampleNFT2 = { ...sampleNFT, to: user2.address };
+
+    const tokenId = await mintNFT(sampleNFT);
+    const tokenId2 = await mintNFT(sampleNFT2);
+    {
+      const owner1 = await zetaXP.ownerOf(tokenId);
+      const owner2 = await zetaXP.ownerOf(tokenId2);
+      expect(owner1).to.equal(user.address);
+      expect(owner2).to.equal(user2.address);
+    }
+    {
+      const token1 = await zetaXP.tokenByUserTag(user.address, sampleNFT.tag);
+      const token2 = await zetaXP.tokenByUserTag(user2.address, sampleNFT.tag);
+      expect(token1).to.equal(tokenId);
+      expect(token2).to.equal(tokenId2);
+    }
+    await zetaXP.connect(user).transferFrom(user.address, user2.address, tokenId);
+    {
+      const owner1 = await zetaXP.ownerOf(tokenId);
+      const owner2 = await zetaXP.ownerOf(tokenId2);
+      expect(owner1).to.equal(user2.address);
+      expect(owner2).to.equal(user2.address);
+    }
+    {
+      const token1 = await zetaXP.tokenByUserTag(user.address, sampleNFT.tag);
+      const token2 = await zetaXP.tokenByUserTag(user2.address, sampleNFT.tag);
+      expect(token1).to.equal(0);
+      expect(token2).to.equal(tokenId2);
+    }
+    await zetaXP.connect(user2).moveTagToToken(tokenId, sampleNFT.tag);
+    {
+      const token1 = await zetaXP.tokenByUserTag(user.address, sampleNFT.tag);
+      const token2 = await zetaXP.tokenByUserTag(user2.address, sampleNFT.tag);
+      expect(token1).to.equal(0);
+      expect(token2).to.equal(tokenId);
+    }
+  });
+});