Bitcoin regulation and taxation remains a focal point for governments and digital currency enthusiasts worldwide. With so many countries still on the fence on how they should handle this disruptive alternative currency, it is difficult to predict how everything will play out in the end. But if you live in Switzerland, you can rest assured, as there will be no VAT to pay on Bitcoin for now.
No Bitcoin VAT in Switzerland
In terms of finance, Switzerland has always been a pretty interesting country to keep an eye on. Not only are they offering some of the best security in terms of storing funds, but most institutes also swear to bank secrecy at all times. Over the recent decades, this has made Switzerland a paradise for tax evasion and storing large amounts of money “off the books”.
And when it comes to Bitcoin, it seems that trend is continuing in a positive manner. On Friday June 12th, the Swiss Federal Tax Administration (ESTV) ruled that bitcoin will not be subject to VAT in the country. In doing so, they not only remain very open to digital currency and Bitcoin-related business, but Switzerland also gives Bitcoin a legal certainty that eludes in other countries around the world.
It has, however, taken a while for Bitcoin to become somewhat legitimized in Switzerland. Back in February of 2014, a formal inquiry regarding the legal status of Bitcoin was sent to Swiss Federal Tax Administration. The main question of this inquiry was whether or not the transfer of BTC was to be viewed as a delivery of goods or services, and if so, whether or not VAT would be applicable.
The ESTV replied in a rather surprisingly positive manner, by declaring the transfer of Bitcoin to be neither a delivery of goods nor of services. To clarify this a bit more, it is legal to pay for goods and services with Bitcoin in the country of Switzerland; but BTC is not seen as a barter trade, and can therefore not be double-taxed.
Whenever you want to exchange to and from Bitcoin from and to fiat currencies – such as the Swiss Franc – you are effectively exchanging a non-official means of payment against a legal tender. As such, transaction fees charged by exchange companies – such as Bitcoin Suisse AG – are covered by the exemptions in Article 21 section 2 of the Swiss VAT Act.
Will The European Union Follow Switzerland’s Lead?
Most of our readers will be well aware of the fact that, even though Switzerland is part of Europe, it is not a member of the European Union and does not use the EURO as an official currency. That being said, the European Union has been looking at how Switzerland regulates and governs “difficult” issues in the past, and taken their lead in terms of coming up with a solution for the entire EU.
Whether or not that will be the case for Bitcoin, is a different matter entirely. The European Union seems to be quite divided on that front, as they feel Bitcoin is a disruptive force threatening the authority of the European Central Bank. In a way, Bitcoin is challenging the current financial infrastructure, but trying to ban it outright in the EU may have far worse consequences compared to taking the Swiss approach.
On June 17th, there will be an official hearing to determine the future of Bitcoin in the European Union. According to Bitcoin.se, the European Court of Justice will be conducting this hearing to see whether or not Bitcoin can be taxed in the EU. Digital currency enthusiasts in Europe can only hope that the Court of Justice will follow the lead of Switzerland regarding this matter.
Source: Bitcoin Association Switzerland
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