About today’s Bitcoin VAT ruling

The news has been out since this morning so most of you have probably already seen it. Finally the judgement in the VAT case in EU court of justice has been published and it is great news. Commission made when exchanging between bitcoin and traditional currencies is VAT exempt. Below are some highlights from the judgement. First of all, it is clarified that bitcoin, the currency, is not ”tangible property” and therefore not subject to VAT.

It must be held, first, that the ‘bitcoin’ virtual currency with bidirectional flow, which will be exchanged for traditional currencies in the context of exchange transactions, cannot be characterised as ‘tangible property’ within the meaning of Article 14 of the VAT Directive, given that, as the Advocate General has observed in point 17 of her Opinion, that virtual currency has no purpose other than to be a means of payment.

The exchange of bitcoins is a service that does fall within the scope of VAT but the main question is then if it can be included in one of the exemptions. The court decided that it actually does fall under the exemption 135.e. One key point in the argument is the ambiguity in different translations of the VAT directive.

the various language versions of Article 135(1)(e) of the VAT Directive do not allow it to be determined without ambiguity whether that provision applies only to transactions involving traditional currencies or whether, on the contrary, it is also intended to cover transactions involving another currency.

[…]

That expression must therefore be interpreted in the light of the context in which it is used and of the aims and scheme of the VAT Directive

The court then clarifies that these transactions are financial transactions and that excluding them from the exemption would ”deprive it of part of its effect”.

Transactions involving non-traditional currencies, that is to say, currencies other than those that are legal tender in one or more countries, in so far as those currencies have been accepted by the parties to a transaction as an alternative to legal tender and have no purpose other than to be a means of payment, are financial transactions.

[…]

It therefore follows from the context and the aims of Article 135(1)(e) that to interpret that provision as including only transactions involving traditional currencies would deprive it of part of its effect.

The conclusion is that it is covered by exemption 135.e.

I am very happy that we finally got this ruling, more than 3 years after I sent my request for a preliminary ruling to Skatterättsnämnden in Sweden. Businesses in Europe now have clear guidance regarding Bitcoin and VAT and hopefully this will encourage Bitcoin entrepreneurs all over Europe to take the step and turn their ideas into reality.

  • hje

    Betyder detta att det inte är nån kapitalskatt på bitcoinväxling eller är det nåt jag missar?

    • Jonathan Silverblood

      Nej, om du använder bitcoin i spekulativa syften och gör vinst skall det fortfarande skattas på din vinst.

      Frågan är dock, om det nu är hur bitcoin används som är avgörande så kanske man inte längre behöver rapportera in vinster man får man använder bitcoin som ett betalmedel för att köpa en kopp kaffe.

      Jag förväntar mig regler som säger att om motprestationen i ett byte där ena sidan av bytet är bitcoin och andra sidan är en traditionell valuta så skall man deklarera och skatta som idag, medan om motprestation inte är en traditionell valuta utan istället en tjänst eller vara så behöver man inte skatta. (kanske med undantag som att ”så länge vinsten i värdeförändring är minde än X”.)

  • sturle

    Congratulations!

  • Jonathan Silverblood

    David, för mycket länge sedan skrev jag upp mig för ett nyhetsbrev inför öppnandet av en växlingsite här på bitcoin.se – nu när beskedet om moms är klar är det bara problematiken med bankkonto kvar antar jag – hur ser planerna ut framöver?

    • D.H.

      Hej! I nuläget har jag inga planer för en börs på bitcoin.se. Det kräver mycket engagemang och en del kapital för att kunna dra igång något sådant så just nu lutar jag istället åt att göra om bitcoin.se till en mer komplett portal (är medveten om att den är ganska bristfällig just nu).

  • Koji Takahashi

    Many congratulations and thank you for pursuing this case for the rest of us. The key to winning this case was your submission, referred to at para. 50 of the judgment, pointing out the the difficulties connected with
    determining the taxable amount and the amount of VAT deductible. Could you explain what exactly are these difficulties? Perhaps you could publish your submission on this website, if it is easier.