To date, there has been no consistency of approach within the EU. In some places Bitcoin is subject to VAT; in others it is exempt. In some states, there is no clarity as to how Bitcoin should be taxed. The Court was asked to consider how an exchange which sold Bitcoin for traditional currencies would be taxed. Hedqvist bitcoin wallet case before the court concerned Mr Hedqvist who wished to set up a Bitcoin exchange.
Before he did this he wanted clarity as to the VAT position of his new business. This led to the Swedish courts asking the European court for clarification. Unsurprisingly this decision confirms that an exchange of Bitcoin for a traditional currency is a supply of services. Whilst this decision is confined to the activities of a Bitcoin exchange, there seems to be no reason why it would not equally apply to hedqvist bitcoin wallet virtual currencies provided such currency has no hedqvist bitcoin wallet other than to be a means of payment.
There are differences in the relevant words in the VAT Hedqvist bitcoin wallet between the different language versions. Given this linguistic uncertainty the court sought to interpret the words in the context it is used, and in light of the aims of the VAT Directive.
It is worth noting that legal tender is a surprisingly narrow concept. For example, Scottish currency is not legal tender.
It would seem strange if Bitcoin were treated differently to Scottish pounds. The impact of this decision on Bitcoin hedqvist bitcoin wallet will depend upon who their customers are. Where a Bitcoin exchange transacts with other businesses, the right to levy VAT belongs to the state in which the counterparty rather than the Bitcoin exchange belongs.
Where Bitcoin exchanges transact with non-businesses for example, an individualthe state which has the right to impose VAT is where the Bitcoin exchange belongs. It is key to the economics of running a Bitcoin exchange that sales taxes are minimised. As a result, where a Bitcoin exchange expects to transact with a significant number of non-businesses, this decision makes Europe look an attractive location to establish a Bitcoin exchange.
Consideration will also need to be given to the expected location of the counterparties to consider the best way to manage any irrecoverable VAT costs resulting from supplies made to the Bitcoin exchange.
Of course sales taxes are not the only factor in deciding where to locate — or even the only tax factor in deciding where to locate. Bitcoin exchanges will need to look at the wider picture in deciding where to base themselves, for example, the availability and cost of skilled personnel is critical. The decision that supplies of Bitcoin should be exempt from VAT has been welcomed by the Bitcoin community.
It provides an important degree of certainty and should help virtual currency exchanges set up in Europe, and may make Europe a more competitive location for exchanges. Use of cookies by Norton Rose Fulbright. We use cookies to deliver our online services. Hedqvist bitcoin wallet and instructions on how to disable those cookies are set out at nortonrosefulbright.
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The decision The Court was asked to consider how an exchange which sold Bitcoin for traditional currencies would be taxed. Relevance to other virtual currencies Hedqvist bitcoin wallet this decision is confined hedqvist bitcoin wallet the activities of a Bitcoin exchange, there seems to be no reason why it would not equally apply to other virtual currencies provided such currency has no purpose other than to be a means of hedqvist bitcoin wallet. Impact on location of Bitcoin hedqvist bitcoin wallet businesses The impact of this decision on Bitcoin exchanges will depend upon who their customers are.
Conclusion The decision that supplies of Bitcoin should be exempt hedqvist bitcoin wallet VAT has been welcomed by the Bitcoin community. Subscribe and stay up to date with the latest legal news, information and events
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