The exchange of bitcoins is exempt from VAT | KPMG | BE

The exchange of bitcoins is exempt from VAT

The exchange of bitcoins is exempt from VAT

In October 2015, the European Court of Justice (ECJ) ruled the exchange of bitcoins into conventional currencies and vice versa.



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In October 2015, the European Court of Justice (ECJ) ruled the exchange of bitcoins into conventional currencies and vice versa, in return for an exchange commission that falls within the VAT exemption for transactions concerning currency, bank notes, and coins used as legal tender provided by the European VAT directive. This judgment is far from being anecdotal.


The exchange of bitcoins for traditional currencies is VAT exempt

The facts can be summarized as follows. A Swedish dealer in bitcoins wishes to provide services consisting of the exchange of traditional currency for the bitcoin virtual currency and vice versa. According to the Swedish dealer, these services are VAT exempt services of currency exchange.

Such a view differs from the Swedish tax authorities, who are of the opinion that bitcoins are not legal tender as required by the European VAT directive. Besides, the latter underlined the fact that bitcoins are not subject to any form of government supervision or control and offer no guarantee to the holders.

The ECJ ruled that the exchange of traditional currency for units of the bitcoin currency (and vice versa) in return for payment falls within the scope of VAT while being however VAT exempt. This judgment was made on the grounds that Bitcoin currency has no other purpose than to be a means of payment and that it is accepted for that purpose by certain operations.


So what does this really mean for Belgian businesses performing exchange transactions in bitcoins?

In Belgium, no official guidelines have been issued at this stage by the VAT authorities in respect to bitcoins exchange transactions. One should therefore rely on the abovementioned ECJ case.

Consequently, bitcoins exchange transactions should in principle be treated as exempt from VAT in Belgium and Bitcoin, as well as other trading platforms, should not charge VAT to their customers on their commissions. However, those platforms have no right to input VAT deduction with respect to investments or expenditures related to their exchange activity, such as investments in technological solutions supporting the exchange activity (hardware, software, data storage, etc.).

Should this not be the case, they would need to comply with the position of the ECJ and may have to revise their contractual arrangements and their VAT position in Belgium.


What is bitcoin and how does it work?

Bitcoins and other virtual currencies are also referred to as crypto-currencies. It can be defined as a type of unregulated, digital money, which is issued and controlled by its developers and accepted by members of a specific virtual community. It is principally used for payments made between private individuals via the Internet and some online shops that accept the currency. The bitcoin currency is one of the virtual currency schemes with “bidirectional flow”, where users can purchase and sell on the basis of an exchange rate. Such virtual currencies are similar to other convertible currencies in regards to their use in the real world. They allow both real and virtual goods and services to be purchased.

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