To impose or not to impose VAT on bitcoin…
A verdict on whether or not digital currency exchanges in Europe will have a mandatory value added tax fee, or VAT will be handed down by the court today.
The court decision will signify the end of a long-drawn proceeding that started with a debate on whether services that involve buying and selling of virtual money should have a value-added tax fees.
This, after Swedish national David Hedquist inquired with regards a clarification on business bylaws on how digital money should be taxed before he engages in a bitcoin brokerage trade.
Following initial deliberations a court in Switzerland decided that brokerage firms that use bitcoins must be VAT-exempt, a finding opposed by the Skatterverket, the Swedish tax agency. Europe’s Court of Justice was later on asked about its opinion on the matter.
While the Court of Justice has yet to decide with finality on the dispute, initial clues suggest it may not oppose the VAT exemption.
Court Advocate General Jillian Korott recommended in July this year that digital currency exchanges be exempted from the value added tax requirement, a proposition that drew support from bitcoin advocates.
The decision, based on the opinion of many observers, could stretch beyond the specific inquiries prior to it that is seen to have a big effect on Europe’s cryptocurrency advocates and even company stockholders.
According to Baker Mckenzie taxation legal counsel Roger de Berg, to be able to answer the queries about bitcoin exchange services, the European Court of Justice could reason that it first must validate what such an exchange will accomplish and how its assets should be qualified.
De Berg disclosed that: “as such, it might also dig into the VAT treatment of bitcoin and thus come up with a ruling on whether bitcoin itself is subject to value added tax.”