Bitcoin business should be exempt from VAT

“Bitcoin operations should be exempt from VAT,” European judicial officials proposed in an opinion document published today.

Attorney Julia Kokott urged the court not to impose VAT on bitcoin purchases and sales, citing the existing European VAT directive that exempts currency transactions from VAT. Julia further argued that bitcoin, while not legal tender, is still a form of money.

Kocot wrote in his opinion:

“I therefore recommend that the court should grant tax exemption to bitcoin operations pursuant to article 135, paragraph 1, clause 5 of the Tax Exemption Directive.”

Swedish tax officials also asked the European Court of Justice to consider the matter last June. At the time, the Swedish Tax Agency (Skatterverket) disagreed with a Swedish court ruling that bitcoin transactions should be exempt from VAT. The decision was caused by a dispute between the tax agency and bitcoin forum operator Daniel Hedegwit.

Decisions of EU member states

Various EU member states have decided to exempt Bitcoin from VAT.

Last year, the Belgian Federal Public Service Finance (FPS) announced that certain domestic digital currency transactions could be exempt from VAT.

The Bitcoin community in Spain also welcomed the good news of digital currency being exempt from VAT in April this year. A spokesperson from the Spanish Tax Office told CoinDesk that digital currency has always been exempt from VAT, but the court’s ruling has given digital currency a clear legal guarantee for VAT exemption.

The spokesperson said the legal provision is based on EU VAT Directive 112/2006/CE, which defines bitcoin as a “financial service.”

Last month, Bitcoin enthusiasts in Switzerland also celebrated the country’s VAT-free regulations for Bitcoin.

Not all EU countries have embraced the VAT exemption for Bitcoin. In December last year, Estonia made VAT on Bitcoin transactions mandatory, and levied it on the total amount of the transaction, not just the commission or fees incurred by the exchange.