The Court of Justice of the European Union delivered its judgment earlier today in the long-awaited case on whether Bitcoin exchange services are considered to be VAT exempt services. The Court followed the earlier opinion of the Advocate General and confirmed that the exchange of Bitcoins into conventional currencies and vice versa in return for a exchange commission falls within the VAT exemption for transactions concerning currency, bank notes and coins used as legal tender provided by the European VAT Directive.
This judgment was made on the grounds that Bitcoin (as a virtual) currency has no other purpose than to be a means of payment and that it is accepted for that purpose by certain operations.
You can access the judgement here.
ECJ Advocate General Kokott has recommended the Court to consider dealing in bitcoins for a commission to be a service exempt from VAT under the currency dealing provision (link – to the German version of the opinion. In English it is not yet available) .
A Swedish dealer in bitcoins (buying and selling bitcoins in exchange for Swedish kroner) was in dispute with the tax office over the VAT liability on the currency exchange. He maintained that he was providing a VAT exempt service of currency exchange, whereas the tax office disputed the point because bitcoins are not legal tender. It was also pointed out that bitcoins are not subject to any form of government supervision or control and offer no guarantee of continued usefulness to the holder. Find out more
In the last couple of years virtual currencies become more popular. Recently we can see that more and also well established businesses are accepting this as payment method every day, e.g. Dell, Overstock.com or Expedia – just to name a few completely different businesses. We already posted some updates on virtual currencies (here, here , here and here). In this update we focus on bitcoin, being one of the most widely known virtual currency and the VAT questions it has already triggered.
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In a recent decision issued for an online Bitcoin trading platform, the Belgian tax authorities have confirmed that the trading of Bitcoins and other virtual currencies is similar to the activity of an intermediary negotiating in securities and other negotiable instruments and, as a consequence, is exempt from VAT under the Belgian VAT code provision implementing Article 135(1)(d) of the EU VAT Directive. As a result, the activities should be treated as exempt from VAT and Bitcoin and alike trading platforms should not charge VAT to their customers with respect to their exchange services. On the other hand, those platforms have no right to deduct the input VAT paid in relation to their exchange activity.
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