In Skatteverket v David Hedqvist (C-264/14), the CJEU has ruled that that bitcoin – and other virtual currencies – should be treated as a currency for VAT purposes, meaning that cryptocurrencies such as bitcoin can be exchanged without VAT in the European Union and thus putting them on a level playing field with more traditional currencies.
The ruling follows a dispute when David Hedqvist, a Swedish national, applied for permission to operate his online bitcoin exchange. The Swedish Revenue Law Commission told Hedqvist that bitcoin was exempt from VAT, but the Swedish Tax Authority appealed against that decision. However, the CJEU ruled that the fact that it was not legal tender in any country (i.e. not ‘guaranteed and supervised by law’) was irrelevant, as bitcoin was still, for VAT purposes, a currency.
Daniel Lyons, indirect tax partner at Deloitte, said that if bitcoin was subject to VAT, it ‘would be at a distinct disadvantage to traditional currencies both in terms of administrative inconvenience and possible extra VAT costs. The CJEU’s decision, and its refusal to be limited by a traditional view of what constitutes a currency, will give more certainty to participants in the market. It may boost confidence in cryptocurrencies and could lead to wider adoption.’
In Skatteverket v David Hedqvist (C-264/14), the CJEU has ruled that that bitcoin – and other virtual currencies – should be treated as a currency for VAT purposes, meaning that cryptocurrencies such as bitcoin can be exchanged without VAT in the European Union and thus putting them on a level playing field with more traditional currencies.
The ruling follows a dispute when David Hedqvist, a Swedish national, applied for permission to operate his online bitcoin exchange. The Swedish Revenue Law Commission told Hedqvist that bitcoin was exempt from VAT, but the Swedish Tax Authority appealed against that decision. However, the CJEU ruled that the fact that it was not legal tender in any country (i.e. not ‘guaranteed and supervised by law’) was irrelevant, as bitcoin was still, for VAT purposes, a currency.
Daniel Lyons, indirect tax partner at Deloitte, said that if bitcoin was subject to VAT, it ‘would be at a distinct disadvantage to traditional currencies both in terms of administrative inconvenience and possible extra VAT costs. The CJEU’s decision, and its refusal to be limited by a traditional view of what constitutes a currency, will give more certainty to participants in the market. It may boost confidence in cryptocurrencies and could lead to wider adoption.’
