European Court of Justice (ECJ) has ruled the decision to exempt BTC transactions from Value Added Tax (VAT). This is great Bitcoin News for all whose business involves this cryptocurrency. It basically means a huge step for bitcoin towards being officially recognized as legal currency.
Michael Kent, CEO and founder of digital money transfer company Azimo said that even the fact that EU court is discussing the legal status of bitcoins “is another big step forward in recognition for digital currencies.”
Bitcoin has no central issuing authority and is not controlled by any bank or state; so the interpretation of what bitcoin actually is, is a subject of discussion of many financial and economic institutions today and of crucial importance. Is bitcoin a commodity or means of payment? Is it a currency or a product? The way it is regulated really depends on how you look at it.
ECJ Discusses the Status of Bitcoins
The whole process was started by a Swedish citizen, David Hedqvist. Hedqvist runs a service for exchanging bitcoins for regular money and vice versa. He felt that whether VAT should be applied to BTC transactions or not had to be regulated by law, so he approached the Sweden Tax Office – the Skatteverket.
It turned out that this complex question was bigger than the Skatteverket and the tax office simply couldn’t find an acceptable solution on its own. They decided that it was an issue the European Union should tackle and find the joint stand. So, they placed the question of whether bitcoins should be exempt from VAT or not before the ECJ.
Hedqvist was certainly not the only one to be pleased to learn the bitcoin news – that ECJ ruled accepted bitcoins as currency eligible to be exempt from VAT. Many experts in the field, as well as those planning to start a business that involves bitcoins have found this to be a positive development. Also, there are other cryptocurrencies developing daily, so this decision allows hope for them to be accepted as legitimate currency as well.
Reactions to Bitcoin News
Simon Dixon, CEO at Bnktothefuture.com supports this turn of events explaining that if we treated bitcoin as a currency, it would result in its free flow.
Advocate General, Juliane Kokott said in her opinion document that BTC is not legitimate money; yet it is a form of money and as such it should be exempt from the VAT.
Jens Bader, chief commercial officer of Secure Trading, thinks that bitcoin is not a currency but a product, tradable commodity, like gold and silver. He added that while currencies are highly regulated, tradable goods are not. Therefore, according to Bader, bitcoins are merely products “attributed and traded for a value, and nothing more.”
Following the ruling of the ECJ, more and more EU countries are working to adjust their tax laws to this bitcoin news. Still, most countries have little or no regulations regarding this matter. On the other side, the UK and Belgium were the first to exempt BTC transactions from the VTA in 2014.
Spain joined the UK and Belgium and declared BTC trading exempt from VAT in April 2015.
On the flip side, not all European countries are happy with this bitcoin news. Estonia, for example, previously imposed a 20% Value Added Tax for BTC transactions and profits made from bitcoin-to-regular currency transactions; while Poland decided on an even higher tax rate – 23% percent. Lithuania and Bulgaria on the other hand decided on the tax of only 5% and 10% on BTC exchange. Slovenia decided to treat profits made from mining bitcoins as personal income; Slovenia says that it won’t tax people, but will examine each case individually.
Implications of Bitcoin VAT Exemption
Probably the biggest concern about taxing BTC transactions is double taxing. Meaning that merchants would be taxed twice for BTC transactions, for the countries where the tax payment for BTC transactions is required. Merchants selling their goods for bitcoins are taxed twice – once for making profits from selling their goods and services for bitcoins and the second time when they convert bitcoins to regular currency.
The latest Bitcoin News – that all BTC transactions should be exempt from VAT – lots of new opportunities are opening in various industries, markets and businesses, which is really great bitcoin news for all in the business that involves cryptocurrency trading.
Despite the current inconsistent stand among European countries regarding this bitcoin news, it is expected that more and more countries will work to adjust their laws to it.