Today’s ruling at the European Court of Justice (ECJ) means that transactions involving bitcoin – the digital currency – will be exempt from value-added tax (VAT).
First introduced in 2009, bitcoin transactions are, according to the ECJ, “exempt from VAT under the provision concerning transactions relating to currency, bank notes and coins used as legal tender”.
The news has been welcomed by European bitcoin exchanges, who would have faced major difficulties if a different judgement was passed.
Senior legal advisors at the ECJ had already indicated that the non-traditional currency, which is created and held electronically, should not be subject to VAT, but Judges in the court do not always agree with their advice.
A dispute between David Hedqvist, who sells Bitcoin on his website, and the Swedish tax authority, the Skatteverket, was the reason for the legal case being launched.
However, despite uncertainty around the issue, the judgement at the highest court in the EU has clarified the stance, stating that when virtual bitcoin exchanges were used as a way of issuing a payment it would be exempt from VAT.
The situation regarding bitcoin status in the US is different to Europe, where a number of criminal cases have categorised the virtual currency alongside money, primarily for money laundering offences.
While bitcoin now represents a good investment for European savers, the US Commodity Futures Trading Commission (CFTC) last month stated that it was a commodity and also closed down Coinflip, the trading platform.
