The most popular Swedish news site, Dn.se, has reported the European Court of Justice as stating, “Bitcoin is a means of payment and that the exchange should therefore be exempted VAT obligations.”
Three years ago, Swedish software developer David Hedqvist and moderator of Bitcoin.se asked the European Union if Bitcoin transactions are exempt from VAT. According to the findings of the court:
“Bitcoins also constitute a currency. Their ownership has no other point other than the ability to use them again as currency at some future point. Therefore they are to be treated just like legal currencies as far as VAT is concerned.”
However, the Swedish Tax Agency argued against the Board of EU directives, and said that they have mistakenly interpreted the matter. The Agency appealed to the Supreme Administrative Court and urged it to proceed with a preliminary ruling, the final determination in law by EU courts that can be initiated by any EU member state.
A legal expert at the Swedish Tax Agency announced, "We disagreed with the Board's reasoning. Then we thought it was also important to get a clear understanding about Bitcoin and VAT.”
Due to the Swedish Tax Agency’s actions, Hedqvist took the matter into his own hands and declared arguments against them. For this, Hedqvist is working with Stockholm’s most prestigious corporate law firms and all of his costs are covered by companies in Bitcoinbranschen, because the companies believe that the tax exemption decision would greatly benefit them.
“It is important for them because it applies to their commission as shifting business to be subject to VAT. It is also important for bitcoin from a broader perspective, if there is to be equated with other currencies. It is also important that the new technology is not stopped by laws and regulations that are lagging behind.”
Several European Countries already Exempt from VAT
The General Directorate of Taxes (DGT) announced in April that Bitcoin is exempt from value-added tax (VAT) in Spain, United Kingdom and Germany. The DGT stated that Bitcoin is considered as a medium of payment or a financial instrument, and thus is classified as a financial service rather than a simple good or commodity.
Paragraph (h) of article 20.18 of the VAT Act states, “Transactions regarding transfers, money orders, check, promissory notes, bills of exchange, debit or credit cards and other payment orders."
If the preliminary ruling becomes final, many European countries will be exempted from VAT, Including Germany, the United Kingdom, France, Finland and Belgium.