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Germany: VAT treatment of bitcoin, virtual currencies and transactions

Germany: VAT treatment of bitcoin, virtual currencies

The German Ministry of Finance (BMF) issued guidance that includes its position concerning the value added tax (VAT) treatment of bitcoin and other “virtual currencies.”

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Following the judgment of the Court of Justice of the European Union (CJEU) in a 2015 case—Hedqvist (C-264/14, 22 October 2015)—the BMF’s position is that:

  • The conversion of conventional currencies into bitcoin (and vice versa) is exempt from VAT.
  • Using bitcoin for a mere payment is not subject to VAT. 

This position applies to all open cases in Germany. These principles also apply to other virtual currencies insofar as the currencies have been accepted by the parties to the transaction as an alternative contractual and direct payment instrument, and do not serve any purpose other than use as a payment instrument. Thus, these principles do not apply to virtual play money. In addition, the BMF guidance addresses certain follow-up questions in relation to the VAT treatment of bitcoin (relating to, for example, services of miners, fees for wallets, services of operators of a trading platform). 

Other VAT developments

Other recent VAT developments that may affect businesses in Germany include the following items:

  • A CJEU judgment denying the right to deduct input VAT due to a time limitation—Volkswagen AG, C-533/16 (21 March 2018)
  • A CJEU judgment denying the right to deduct input VAT due to non-registration—Dobre, C-159/17 (7 March 2018)
  • A decision of the Münster Lower Tax Court on the VAT treatment of members of supervisory boards if they are seconded from a parent company—BFH ref. no.: V R 62/17

 

Read an April 2018 report [PDF 285 KB] prepared by the KPMG member firm in Germany

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