Governments around the world are focusing their attention on Bitcoin and digital currency in terms of regulation and potentially charging taxes. In Europe, the playing field is a bit divided, with a few countries declaring Bitcoin exempt from VAT, while others are still unsure what to do, and several countries ignoring the matter altogether for the time being. But in Spain, we finally have a verdict: Bitcoin is exempt from VAT.
Europe Remains Divided on Bitcoin & VAT
Over the past few months, several European countries have taken up a stance towards taxing Bitcoin or not. Germany, for example, has openly declared Bitcoin exempt from VAT, as Bitcoin will be labelled as “private money” and a “complementary currency” for the time being. This does not mean the ruling cannot change over time, but that is the way things stand for the time being.
Contrary to popular belief, the United Kingdom is not taxing Bitcoin either. Despite building up a reputation of not providing sufficient banking relations with Bitcoin companies, the government is not against Bitcoin by any means. The Mining, exchanging and any charges above the Bitcoin value for carrying out BTC transactions are all exempt from VAT, according to a ruling of 2014.
Yet other countries such as Poland and Estonia have clearly stated Bitcoin and digital currency is not exempt from VAT charges, in their respective territories. Exemptions for financial services should be strictly interpreted. According to Polish taxing authorities, Bitcoin is a unit of account and a payment system, even though there is no legal status attached to Bitcoin.
Major countries, such as Sweden and France, have yet to make up their mind regarding taxation of Bitcoin and digital currency. While France has a more “laissez-faire approach”, in terms of waiting for an official ruling from the European Union, Swedish authorities are trying to figure out how to “classify” Bitcoin properly at this point in time.
Spain: Bitcoin Exempt from VAT
Spanish government officials are not waiting around to see what the European Union wants to do with Bitcoin taxation and have decided to take matters into their own hands. The official report states that “virtual currencies such as Bitcoin work as a means of payment and, considering its features, shall be considered under the concept of ‘other negotiable instruments’, making its transmission both liable and exempt from VAT”.
In saying so, the Spanish government not only rules that Bitcoin transactions are not subject to VAT, but they also elevate Bitcoin to the level of “means of payment”. This creates a legal precedent that may very well be adopted by the rest of the European Union in years to come, and also means that Bitcoin is no longer a “commodity”.
Do keep in mind that this ruling does not make Bitcoin legal tender in Spain, as that possibility has been ruled out by the General Directorate of Gambling Regulation (DGOJ). However, the General Directorate of Taxes (DGT) is considering to make Bitcoin a recognized payment instrument, which aids in considering Bitcoin as a legal currency.
It will be interesting to see how this ruling will affect other countries in the European Union. What are your thoughts? Let us know in the comments below!
All images courtesy of DollarPhotoClun