29 October 2015

No VAT on Bitcoin Exchange in the EU

  • Articles
  • Compliance
  • Tax
  • Blockchain / Digital Assets

Good news for digital currency service providers. The CJEU ruled that transactions to exchange a traditional currency for bitcoin virtual currency were not subject to value added tax (VAT).

  • Dr. Martin Eckert

    Legal Partner
Good news for digital currency service providers. The Court of Justice of the European Union (CJEU) ruled that transactions to exchange a traditional currency for bitcoin virtual currency, or vice versa, were not subject to value added tax (VAT). EU’s top court applied the VAT exemption for the exchange of traditional currencies also on bitcoin transactions (Skatteverket v David Hedqvist (C-264/14), 22 October 2015). The decision removed some regulatory uncertainty surrounding bitcoin transactions, perhaps spurring further development in this growing industry. MME expects a positive impact on bitcoin service providers in the EU.

The EU Ruling is in line with Swiss practice. Responding to the formal request of some Swiss bitcoin organizations, the Swiss Federal Tax Administration (SFTA) has confirmed to treat Bitcoins the same way as the Swiss Franc or other FIAT, i.e. trading in Bitcoins is neither a delivery nor a service for the purpose of Swiss VAT but rather a mode of payment and as a result VAT-free (cp. art. 21 para. 2 of the Swiss VAT Act).
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