EU: Bitcoin is exempt from VAT

In 2013, Swedish software developer David Hedqvist asked the European Union to give a response on the taxation of Bitcoin transactions. Nearly three years later, the EU finally gave its answer: NO! In other words, Bitcoin businesses in Europe are exempt from VAT on transactions.

David Hedqvist, who runs Bitcoin.se, a bitcoin forum website, had been looking to expand his online business and launch a bitcoin exchange, but he was unsure whether he would be subject to VAT, so he turned to the Swedish Tax Agency for help.

"I got a very vague answer at the time, so later I wrote to the tax office for a clear answer. About a year later I finally got the confirmation that Bitcoin exchanges should be exempt from VAT," David Hedqvist said in an interview with the Swedish website DN.se.

However, the decision sparked a conflict between the tax department and the tax bureau. The tax department believed that the tax bureau's board had misunderstood the previous EU directive and appealed the matter to Europe's highest administrative court, asking the European Court of Justice to make a ruling.

As time went by, the answer was finally revealed. The legal adviser of the European Court of Justice said on Thursday (July 16) that digital virtual currencies should be exempt from value-added tax. Attorney General Juliane Kokott referred to the previous relevant resolution of the Luxembourg Court.

"I therefore suggest that the court should refer to Article 135(1) of the ECJ's Regulation on the VAT Directive."

At the same time, Kokott also admitted that Bitcoin is not legal tender, it is still a form of currency.

The UK has already decided to exempt Bitcoin businesses from VAT, and the EU will follow the UK's footsteps. Tim Rehder, CEO of London-based Bitcoin Market, told Reuters, "This decision will provide solid legal support for Bitcoin businesses and default on the legal status of Bitcoin as a payment medium."