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EU Court Rules Against VAT for Bitcoin Exchanges

Last Updated March 4, 2021 4:44 PM
P. H. Madore
Last Updated March 4, 2021 4:44 PM
David Hedqvist // LinkedIn
David Hedqvist // LinkedIn

The European Union’s Court of Justice Advocate reached a decision today on the validity of value-added taxation for Bitcoin trading.

After careful consideration of arguments from Estonia, Germany, Sweden, and members of the European Bitcoin industry including David Hedqvist , the court decided that the acquisition of Bitcoin was not a taxable event in the eyes of the VAT.

Also read: European Union to Rule on Bitcoin VAT Today

While there is currently no English translation of the ruling , the Google translate edition does it enough justice to decipher the reasoning behind it.

The conversion of a pure means of payment in legal tender and the reverse exchange, for each compensation is payable, which reckons the provider of this service in the fixing of exchange rates, 2 is a service for consideration within the meaning of Art. Section. 1 literally. c of the VAT Directive.

Earlier in the document, the author considers why the transactions do not fall under existing exemptions, such as Section 1, Paragraph 135  (“exemptions for other activities”), sections D and E, which state:

Member States shall exempt the following […] (d) transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments, but excluding debt collection.

[…] (e) transactions, including negotiation, concerning currency, bank notes and coins used as legal tender, with the exception of collectors’ items, that is to say, gold, silver or other metal coins or bank notes which are not normally used as legal tender or coins of numismatic interest.

The ruling points out that exempting Bitcoin and non-government digital currencies under these stipulations would ultimately make the VAT directive meaningless as a whole, and is hence the reason they must make a ruling. Then, in terms of an actual decision, the court finds that sales of Bitcoin are exempt under paragraph E:

Such sales are pursuant to Art. 135 para. 1 literally. E of the VAT Directive exempt from tax.

The ruling will be the basis for how European Bitcoin exchanges operate from here on out.