Professing that the Bitcoin is a form of money, the Advocate General of the European Court of Justice (ECJ), Juliane Kokott, said that the digital currency should be exempt from Value Added Tax (VAT).
The proposal came in response to the Swedish tax office’s request to defog the tax status of Bitcoin in Europe, and end all the legal uncertainties that surrounds it in the current regulatory climate. At that time, the Swedish authority had challenged a court decision that had excused Bitcoin transactions from Bitcoin operations from falling under the VAT’s purview.
The EU’s highest court, therefore, felt obliged to submit its opinion on the matter, and recited certain legal technicalities that somewhat support the ruling of Swedish court decision. For instance: a VAT Directive from 2006 — 2006/112/CE — describes virtual currencies as a “financial service” — a medium of exchange — that neither looks like a delivery of a good nor a service. If the said law is to be followed, the European nations are obliged to excuse Bitcoin sales and purchases from VAT.
The ECJ, however, shied away from giving a final decision on the matter, thereby leaving scope for further discussions and arguments.
Bitcoin VAT Status in Europe
It seems that each of the European country has its own definition when it comes to treating Bitcoin as VAT-enabled product. According to the previous announcements, only Spain, Switzerland and Belgium have openly exempted Bitcoin operations from VAT; while, Germany has not been such kind to the digital currency industry. As per its standards, only the exchange between one national currency with another justifies the need for VAT exempt. With Bitcoin being a decentralized, non-government currency, its VAT cannot be subsidized.
The other European countries, meanwhile, have not cleared their official stand on the digital currency sector.