Tax Exempt, Bitcoin Escapes European VAT




Bitcoin European VAT

The Advocate General of the Court of Justice of the European Union (CJEU), the highest court of European Union law, recently stated that exchange between virtual and fiat currencies should not be subject to Value Added Tax (VAT). The Advocate General’s argument, while not yet the final decision on this matter, is cause for optimism among European Bitcoin enthusiasts.

Cryptocurrency traders and exchanges in particular will be pleased at the prospect of freedom from the European VAT due to the transaction fees charged when converting between fiat and cryptocurrency, although such fees are generally insignificant amounts. Likely far more appealing is the freedom from the administrative burden of compliance with such a tax.

Background

David Hedqvist
David Hedqvist

This decision is the latest turning point in the legal case initiated by Swedish software developer and entrepreneur, David Hedqvist. David wished to sell bitcoin for Swedish krona through his website, bitcoin.se, and so requested legal clarity on the tax implications from his country’s court. The court found in favor of VAT-exempt status but this decision was then challenged by the Swedish tax agency.

The matter was escalated to the CJEU in Luxembourg, where representatives of Sweden’s tax agency and finance ministry, as well as their German counterparts, argued in unsuccesful opposition to Mr. Hedqvist and his legal councel. The CJEU’s stance reflects that of several European nations, including the United Kingdom, Finland, Spain, Switzerland and Germany, where bitcoin is considered “private money” and thus VAT-exempt for personal use.

Conclusion

It can be hoped that the CJEU will soon rule Bitcoin to be entirely European VAT-exempt, thus settling Bitcoin’s tax status across the region and possibly beyond, as other nations follow their guidance.

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