The German Federal Ministry of Finance (BMF) took this CJEU judgment as an opportunity to publish a circular on the VAT treatment of Bitcoin and other so-called virtual currencies. The statements in the BMF circular are binding for all tax authorities in Germany and will be included in . An area that creates a lot of confusion among taxpayers is the application of VAT, or the value-added tax most countries levy on the sales of goods and services. Georgia has become the latest nation to free crypto-fiat transactions from VAT, a decision that affirms Bitcoin’s status as a currency. The FPS said that bitcoin trading transactions are currently exempt from VAT under Article 44 of the country’s VAT code, telling Belgacoin that should the determination be reversed, a retroactive.
Vat committee bitcoinVAT treatment of Bitcoin & cryptocurrencies: Recent circular of the BMF
That being so, it may be difficult to determine the most representative exchange market of a Member State. Since Bitcoin is traded on multiple exchange platforms, its value in other currencies such as euro varies at any given moment, depending on the exchange platform. The document confirms that Irish Revenue view the exchange of Bitcoin for fiat currency as constituting VAT exempt activity pursuant to paragraph 6 1 d of Schedule 1 of the VAT Consolidation Act , where the business performing the exchange acts as principal i.
Irish Revenue has adopted the position that income received from cryptocurrency mining activities will generally be outside the scope of VAT on the basis that the activity does not constitute an economic activity for VAT purposes. While this article has identified some of the possible VAT issues associated with cryptocurrencies, it is important to note that Corporation Tax, Income Tax, Capital Gains Tax, Stamp Duty and Capital Acquisitions Tax considerations also warrant consideration by any party engaging in cryptocurrency activity.
Furthermore, on a related note, any party considering raising capital by way of an Initial Coin Offering otherwise referred to as a token sale or token launch should consider the taxation implications of doing so. Parties acquiring such tokens also need to consider the associated taxation implications.
My Deloitte. Undo My Deloitte. Save for later. What are cryptocurrencies? VAT considerations The complexity of the underlying innovative technology and the transactions involved add to the depth of taxation issues associated with the use of Bitcoin and, by extension, other cryptocurrencies that share the same characteristics. European case-law There is a VAT exemption contained in the EU VAT Directive in relation to currency exchange activity but, on its face, the exemption only applies to the currencies which can be used as legal tender.
For example, the peculiarities of the Bitcoin system give rise to doubt on this point for the following reasons: i Existing exchange markets for Bitcoin are subject to constant change.
Mining activity Irish Revenue has adopted the position that income received from cryptocurrency mining activities will generally be outside the scope of VAT on the basis that the activity does not constitute an economic activity for VAT purposes. Concluding remarks While this article has identified some of the possible VAT issues associated with cryptocurrencies, it is important to note that Corporation Tax, Income Tax, Capital Gains Tax, Stamp Duty and Capital Acquisitions Tax considerations also warrant consideration by any party engaging in cryptocurrency activity.
Contact us. Conor Walsh Director, Indirect Tax conwalsh deloitte. Richard McDaid Director Indirect tax rmcdaid deloitte. Contact us Submit RFP. Did you find this useful? Yes No. Related topics Indirect Tax. Welcome back. Still not a member? Join My Deloitte.
Keep me logged in. Forgot password. Link your accounts. You previously joined My Deloitte using the same email. Log in here with your My Deloitte password to link accounts. According to the BMF circular, the last published trading price of the cryptocurrency has to be converted into euros at the time the VAT is incurred. The seller or service provider has to document the relevant exchange rate. The statements of the BMF set out above exclusively relate to VAT and not to any other types of tax, such as income tax.
Any comparison with other types of taxes, even foreign ones, such as US income tax imposed on the sale of assets capital gains tax therefore does not lead anywhere. Put more specifically, the mere fact that the exchange of a cryptocurrency into a conventional currency is exempt from VAT does not mean that the profit gained from the purchase and sale of the cryptocurrency is not subject to income tax within the one-year speculation period Sec.
In principle, however, the BMF assumes that the transaction fee is not subject to VAT if the transaction fee is paid voluntarily. Accordingly, any remuneration with Bitcoin is also not subject to VAT. If a wallet provider requests a fee for the use of the wallets, VAT is payable on the fee if the service is provided in Germany so-called electronically rendered service, Sec.
When trading cryptocurrencies through exchange companies, the VAT treatment of fees depends on the specific contractual agreements between the exchange company and its customers. The BMF considers the services provided by the exchange companies to be technical services which are in principle subject to VAT. However, if the exchange company buys the cryptocurrency from and sells it to the customer in its own name, any fees paid by the customer for this purpose are exempt from VAT Sec.
If several exchange companies are involved in the purchase and sale of cryptocurrencies, the contractual relationships must be assessed on each level in order to ascertain whether the service provided is subject to VAT or not. Steffen specialises in tax consultancy for banks and payment transaction companies, private clients as well as medium-sized companies and entrepreneurs. Among other things, he advises clients on the VAT implications of their business relations, corporate and estate succession planning for tax purposes, real estate tax law as well as international tax law.
Your email address will not be published. T Tax. Steffen Rapp Steffen specialises in tax consultancy for banks and payment transaction companies, private clients as well as medium-sized companies and entrepreneurs. Pingback: How to buy Bitcoin in Germany - Businessdaylight. Leave a Reply Cancel reply Your email address will not be published. Next article —. You May Also Like. Read More 4 minute read.
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