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EU Advocate General says bitcoin VAT exempt

  • Jul 15, 2015 | Richard Asquith

EU Advocate General says bitcoin VAT exempt

The EU’s Advocate General opined on 16 July 2015 that digital currencies, such as bitcoin, should be considered a method of payment, and therefore exempt from EU Value Added Tax.

The opinion should provide guidance for member states which had differed in their VAT treatment of the emerging virtual currencies, and had asked for official guidance. Countries such as Poland and Germany had ruled trading on exchanges as subject to full VAT making using cryptocurrencies 20%+ more expensive depending on the local national VAT rate.

Advocates General opinion

The AG’s ruling relates to a referral from the Swedish tax authorities, which wanted bitcoins categorized as a means of barter or commodity and therefore subject to VAT. The Swedish authorities believed that trading services should be subject to Swedish VAT at 25%. It considers bitcoin as a commodity, similar to gold, and therefore not exempt under Article 35 of the EU VAT Directive. Sweden has been joined in this view by Germany.

But the AG has sided with the UK and others, considering it a form of private money – in contrast to national (‘fiat’) currencies. This makes it a financial service, and therefore exempt from VAT under the EU VAT Directive.

Services associated with trading bitcoins may still be liable to VAT. Any realized gains in the appreciation of value of bitcoins held would be subject to income tax or corporate income tax.

An AG ruling is not binding on the final court ruling, with will come from the European Court of Justice, but it is an extremely strong indication of the final position.

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is the former VP Global Indirect Tax at Avalara