Virtual currencies like bitcoin can now be exchanged VAT-free following a pivotal decision today (22 October) by the European Court of Justice.
The ruling clears up a grey area that was identified in a dispute in Sweden where the country’s tax authority clashed with bitcoin forum operator Daniel Hedqvist over whether cryptocurrencies have tax-free status.
Bitcoin currency was created in 2008 by a group of programmers using the name Satoshi Nakamoto and has quickly become a kind of barely-legal tender cherished by its enthusiastic users. However, its reputation has been somewhat tarnished due to its use by criminal entities because it allows money to be transferred anonymously.
The European Court of Justice ruled today: “Transactions to exchange traditional currencies for units of the bitcoin virtual currency (and vice versa) constitute the supply of services since they consist of the exchange of different means of payment.”
The decision follows an opinion expressed by the court’s Advocate General Juliane Kokott in July that bitcoin operators should be exempt from VAT.
Bitcoin image via Shutterstock