EU High Court Says Bitcoin Not Subject to VAT (Oct. 27, 2015)
The exchange of traditional currency for bitcoins is not subject to value added sales tax, the European Union’s top court ruled this week. The decision by the European Court of Justice (ECJ) effectively classifies bitcoin as a type of currency, rather than “tangible property,” the purchase of which is subject to consumption tax. Under EU law, the exchange of one type of currency for another is exempt from VAT tax.
The case stems from Sweden, where the operator of a bitcoin exchange earlier this year requested a preliminary decision from the Swedish Revenue Law Commission on whether VAT must be paid on purchases of bitcoin. The Commission ruled that such exchanges were not subject to VAT. The Swedish Tax Authority appealed the ruling to Sweden’s Supreme Administrative Court, which kicked the case up to the ECJ.
The ECJ’s ruling is a win for bitcoin advocates in the EU—but the digital currency recently has been having a somewhat rougher go elsewhere. Last month, Australia’s major banks reportedly closed the accounts of more than a dozen of the country’s leading digital currency providers, citing AML concerns. Some observers expressed suspicion that the banks were motivated by fear of competition, rather than compliance concerns. And in the U.S., dozens of digital currency providers reportedly have ceased operations in New York in the wake of the state’s institution of licensing requirements for digital currency providers.