The State of New York’s tax authorities have announced that there will be no VAT on the purchase of Bitcoins. In a memorandum on December 5th they stated that since Bitcoin is considered as an ”intangible asset”, no VAT is payable on its purchase. However, if the crypto currency is used to purchase a product or service, VAT is due on this product and/or service.
The memorandum also stated that making a purchase with Bitcoin or other crypto currencies, is considered as a barter transaction by the tax authorities. At the time of the purchase VAT is due on the product’s value in dollar.
Although most Bitcoin enthusiasts prefer governments not interfering with Bitcoin, this seems to be a positive ruling. The fact that you don’t have to pay VAT on Bitcoin purchases makes sure that you’re not paying VAT twice (upon purchasing Bitcoins and upon spending them).
It seems that the crypto currency is considered as real money in this case, although this isn’t being confirmed in the memorandum .For people who would like to see Bitcoin recognized as real money, this seems to be good news. However this is just one state and we’ll just have to wait and see if other states and countries will follow suit.
Earlier the English and Finnish tax authorities already declared that they would not levy VAT on Bitcoin purchases. In Australia there is still an ongoing debate on this issue, but a proposal has been made to tax the Bitcoin transactions. In Europa they are also still debating this issue as well. However an employee of the Dutch ministry of finance, Jakob Kamminga, declared that the ministry is “considering” not to levy VAT on Bitcoin transactions.