Sweden: "Bitcoin" virtual currency transactions are VAT-exempt, holds CJEU

VAT exemption for Bitcoin transactions

The Court of Justice of the European Union (CJEU) issued a judgment concluding that exchanges of traditional currency for the “bitcoin” virtual currency (and vice versa) are exempt from value added tax (VAT).

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The case is: Skatteverket v. Hedqvist, C-264-14 (22 October 2015)

Summary

The EU VAT Directive includes a provision that EU Member States must exempt transactions relating to “currency, bank notes and coins used as legal tender” from imposition of VAT.

A Swedish taxpayer wanted to provide services consisting of the exchange of traditional currency for “bitcoins” and vice versa. Before entering into these  transactions, the taxpayer requested a preliminary decision from the Swedish authorities as to whether VAT must be paid on the purchase and sale of “bitcoin” virtual currency units. Eventually, the Swedish tax authority (Skatteverket) sought review by the Supreme Administrative Court (Högsta förvaltningsdomstolen) which, in turn, asked the CJEU whether such transactions are subject to VAT and, if so, whether they are exempt from that tax. 

As explained in an CJEU release [PDF 159 KB], the CJEU concluded that transactions to exchange traditional currencies for units of “bitcoin” (and vice versa) constitute the supply of services for consideration within the meaning of the VAT Directive, and that those transactions are exempt from VAT under the provision concerning transactions relating to “currency, bank notes and coins used as legal tender.”

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