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Topic: Bitcoin and VAT in the EU (Read 21510 times)

sr. member
Activity: 352
Merit: 250
https://www.realitykeys.com
October 12, 2013, 01:57:55 AM
#52
What this means is that it works like EVERYTHING else in trading:

If you buy a crate of apples and pay in oranges, you do not pay VAT on the ORANGES, you pay VAT on the APPLES.
The article explicitely states that "When using BTC as a MEANS OF PAYMENT, that PAYMENT is VAT-exempt" - NOT the goods you are buying!

For whatever reason they had to clarify this is beyond me.


I don't think that's right. Conventionally if you sell me a crate of apples and I pay you in oranges, IIUC there are effectively two taxable transactions going on: I'm selling you oranges, and you're selling me apples. So you have to charge me VAT on the apples I'm buying from you, and I have to charge you VAT on the oranges you're buying from me. (The way VAT works we may also get VAT credits that may cancel out, but that's a different issue.)

This is different from what happens if you sell me a crate of apples and I pay you in Euros. So the question was whether bitcoins were going to be treated like oranges or like Euros. Common sense obviously says they should be treated like Euros (or at least like a foreign currency) but it wasn't clear whether the letter of the legislation would allow common sense to apply here.
legendary
Activity: 2058
Merit: 1005
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October 12, 2013, 01:44:00 AM
#51
What this means is that it works like EVERYTHING else in trading:

If you buy a crate of apples and pay in oranges, you do not pay VAT on the ORANGES, you pay VAT on the APPLES.
The article explicitely states that "When using BTC as a MEANS OF PAYMENT, that PAYMENT is VAT-exempt" - NOT the goods you are buying!

For whatever reason they had to clarify this is beyond me.
sr. member
Activity: 352
Merit: 250
https://www.realitykeys.com
October 12, 2013, 12:11:03 AM
#50
Just a quick update. The office of Frank Schäffler (a member of the German parliament) forwarded me a letter from the German finance ministry dated last week, which says that Bitcoin is not VAT exempt according to §4. In Abs. 8 b UStG, confirming my previous worries. Their main argument is that BTC is not recognised as a legal tender in any country. Even though the letter does not explicitly say whether other exemptions apply, I suspect they don't. So be careful when trading BTC as a VAT registered company in Germany.

This is indeed bad news. However, there is hope. Let's have a quick look at what §4 Abs 8 b says:

Quote
b) die Umsätze und die Vermittlung der Umsätze von gesetzlichen Zahlungsmitteln. Das gilt nicht, wenn die Zahlungsmittel wegen ihres Metallgehalts oder ihres Sammlerwerts umgesetzt werden,

"Gesetzliche Zahlungsmittel" refers to official currencies. As long as there is no country that makes Bitcoin an officially accepted currency, this section does help Bitcoin being exempt from VAT.

However, there is another section just below (§4 Abs 8 d). It says:
Quote
die Umsätze und die Vermittlung der Umsätze im Einlagengeschäft, im Kontokorrentverkehr, im Zahlungs- und Überweisungsverkehr und das Inkasso von Handelspapieren,

This corresponds to Article 135 d of the VAT directive, which exempts the following from VAT:
Quote
transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments, but excluding debt collection;

Here, it clearly says that payments and transfers ("Umsätze im Zahlungs- und Überweisungsverkehr") are exempt from VAT. The question now is: do Bitcoin transfers and Bitcoin payments qualify as payments and transfers in the sense of this directive?

My hope is that this is indeed the case. I'm Swiss and Switzerland has basically the same clause in its law. I know a VAT tax expert who will provide me with the official comment to the law, which hopefully contains further hints.

So this piece
http://www.welt.de/finanzen/article120823372/Zahlungen-mit-Bitcoins-sind-umsatzsteuerfrei.html

...linked from this Reddit thread
http://www.reddit.com/r/Bitcoin/comments/1o7ldb/wow_bitcoin_no_sales_tax_payment_in_germany/

...seems to say that everything's good?

Is this a confirmation of Hermel's speculation that although the sale of Bitcoins isn't VAT-exempt by virtue of being an official currency, it's instead VAT-exempt by virtue of being a means of payment or something?
sr. member
Activity: 279
Merit: 250
August 19, 2013, 01:54:05 PM
#49
Posted this on reddit, but it's relevant here as well:

Honestly people have been [relatively] positive about this move by Germany, but I don't think people understand the implications quite yet.

As I see it, this is an indirect attempt to put the brakes on a system of payment processing that has far lower fees then competing systems (credit cards) and is therefore a threat to their survival. This tax heavily favors traditional payment mechanisms (Bitcoin's no-tranaction fee just went out the window), no question. That or Germany is afraid to call it a currency as such, in fear of providing too much legitimacy to the protocol, thus they stuffed it in the only other bucket it could be seen fitting: commodity (aka unit of account). This is why new legislation must be written, simply because it doesn't fit anywhere else... all preexisting laws reduce its accessibility/attractiveness on some level.

There is always the possibilities that they don't completely understand the repercussions of such a ruling, but I doubt it.
hero member
Activity: 524
Merit: 500
August 19, 2013, 01:14:52 PM
#48
I hope some trolling lawyer will try to actually get a VAT refund for exported bitcoins. If this attempt will fail, bitcoin becomes VAT-proof Smiley
member
Activity: 67
Merit: 11
August 18, 2013, 08:10:52 AM
#47
Just a quick update. The office of Frank Schäffler (a member of the German parliament) forwarded me a letter from the German finance ministry dated last week, which says that Bitcoin is not VAT exempt according to §4. In Abs. 8 b UStG, confirming my previous worries. Their main argument is that BTC is not recognised as a legal tender in any country. Even though the letter does not explicitly say whether other exemptions apply, I suspect they don't. So be careful when trading BTC as a VAT registered company in Germany.

This is indeed bad news. However, there is hope. Let's have a quick look at what §4 Abs 8 b says:

Quote
b) die Umsätze und die Vermittlung der Umsätze von gesetzlichen Zahlungsmitteln. Das gilt nicht, wenn die Zahlungsmittel wegen ihres Metallgehalts oder ihres Sammlerwerts umgesetzt werden,

"Gesetzliche Zahlungsmittel" refers to official currencies. As long as there is no country that makes Bitcoin an officially accepted currency, this section does help Bitcoin being exempt from VAT.

However, there is another section just below (§4 Abs 8 d). It says:
Quote
die Umsätze und die Vermittlung der Umsätze im Einlagengeschäft, im Kontokorrentverkehr, im Zahlungs- und Überweisungsverkehr und das Inkasso von Handelspapieren,

This corresponds to Article 135 d of the VAT directive, which exempts the following from VAT:
Quote
transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments, but excluding debt collection;

Here, it clearly says that payments and transfers ("Umsätze im Zahlungs- und Überweisungsverkehr") are exempt from VAT. The question now is: do Bitcoin transfers and Bitcoin payments qualify as payments and transfers in the sense of this directive?

My hope is that this is indeed the case. I'm Swiss and Switzerland has basically the same clause in its law. I know a VAT tax expert who will provide me with the official comment to the law, which hopefully contains further hints.
hero member
Activity: 770
Merit: 500
August 16, 2013, 01:49:09 PM
#46
Regulations are coming and pirateat40 was just the beginning of the government's PR campaign.
legendary
Activity: 1106
Merit: 1004
August 16, 2013, 01:44:33 PM
#45
Forcing people to pay VAT when selling bitcoins is practically equivalent to forbidding official exchanges and pushing every exchange either to another jurisdiction, or to the black market.

I really hope they don't actually try to enforce what they told you, and that they eventually come to their senses and change their stance.
donator
Activity: 544
Merit: 500
August 16, 2013, 11:00:22 AM
#44
Just a quick update. The office of Frank Schäffler (a member of the German parliament) forwarded me a letter from the German finance ministry dated last week, which says that Bitcoin is not VAT exempt according to §4. In Abs. 8 b UStG, confirming my previous worries. Their main argument is that BTC is not recognised as a legal tender in any country. Even though the letter does not explicitly say whether other exemptions apply, I suspect they don't. So be careful when trading BTC as a VAT registered company in Germany.
Bro
full member
Activity: 218
Merit: 100
June 19, 2012, 06:32:14 PM
#43
can't you just do the invoice and other official documents in euros, with the bitcoin amounts "For information only", and say that your customer paid in euros through the company MtGox (for instance) like he would have done through Paypal? Let's just say that the money doesn't reach you until MtGox makes a bank wire


(change euro for £,etc, )
legendary
Activity: 2058
Merit: 1005
this space intentionally left blank
June 11, 2012, 02:00:59 AM
#42
The German UStG lists exceptions in §4. In Abs. 8 it lists certain financial services. However I do not see the connection between KWG + ZAG on one hand and UStG on the other. Merely because it looks like they use the same terms, the does not necessarily mean they use the same definitions.

The problem is that noone is sure where to put bitcoin.

currency?
good?
financial instrument?
commodity?

it can be all of that, that's why we love it.
and that's what makes it hard to qualify as either OR.
donator
Activity: 544
Merit: 500
June 11, 2012, 01:24:01 AM
#41
The German UStG lists exceptions in §4. In Abs. 8 it lists certain financial services. However I do not see the connection between KWG + ZAG on one hand and UStG on the other. Merely because it looks like they use the same terms, the does not necessarily mean they use the same definitions.
legendary
Activity: 2058
Merit: 1005
this space intentionally left blank
June 11, 2012, 12:34:10 AM
#40
Sadly, I believe there is an unsubstantiated connection. I do not see a reference to UStG, only to KWG.

Currencies are not subject to VAT, but this is only valid for currencies that are legal tender (anywhere, not only the EUR). So if you sell USD in Germany, you do not need to charge VAT. Since Bitcoin is not legal tender anywhere, it is not a currency for the purpose of VAT.

Maybe we can bribe some minicountry to add Bitcoin to the list of what is accepted as legal tender. That would fix the VAT issue.

sadly, the UStG only refers to "movable bodily objects" when referring to the USt-free trade.
financial instruments (in any sense) that the BaFin says Bitcoins are aren't subject to VAT neither (ever bought a Dax Call and paid 18% USt/MWSt?)

donator
Activity: 544
Merit: 500
June 10, 2012, 04:08:43 PM
#39
Sadly, I believe there is an unsubstantiated connection. I do not see a reference to UStG, only to KWG.

Currencies are not subject to VAT, but this is only valid for currencies that are legal tender (anywhere, not only the EUR). So if you sell USD in Germany, you do not need to charge VAT. Since Bitcoin is not legal tender anywhere, it is not a currency for the purpose of VAT.

Maybe we can bribe some minicountry to add Bitcoin to the list of what is accepted as legal tender. That would fix the VAT issue.
legendary
Activity: 2058
Merit: 1005
this space intentionally left blank
June 10, 2012, 03:52:48 PM
#38
wareen,

nice find. However, I think your conclusion is premature. The document and other references do not mention VAT. So the only thing it means that if you pay with bitcoins, or as a merchant accept bitcoins, you do not need a permit in Germany. Which is good. However, it still leaves the question of VAT open. I lean towards the conclusion that the current laws in Germany classify the usage of Bitcoin as barter (Tauschgeschäft) and is subject to VAT. But I'm not a lawyer :-).

Thanks wareen for this.

IANAL I disagree the key conclusion is that Bitcoins are financial instruments (Finanzinstrumente) even though Bitcoin does not meet the narrow definition of e-money under the EU directive. This then makes Bitcoins not subject to VAT as financial instruments themselves are not subject to VAT.

Let me paint a picture here:

When you buy a piece of cake with EUROs, is the EURO subject to VAT? No, it's the cake that is!
The text (from BaFin, the German SEC) states that Bitcoin is NOT AN E-MONEY, but much like a "local" currency that is treated LIKE MONEY and is thus treated AS MONEY for all intents and purposes that involve the EXCHANGE OF GOODS AND SERVICES.


As soon as they become "financial instruments" (Finanzinstrumente), they are no longer a "local currency".
Instead, you need a license to trade with them, much like any old money changer (or bank) does.
There are varying degrees of licensing that involve different kind of minimum capital requirements (50k to 2mil) and insurance and whatnot.

This ALSO applies if you are not the one trading (ie buying from A, selling to B) but providing the infrastructure (ie bitcoin.de, bitmarket24.eu, etc etc).

So if the Bitcoin is a financial instrument, it CAN NOT be subject to VAT.
Problem is: There is no (ZERO, ZILCH, NADA, ZIP, NIENTE, NIXDA) data on Bitcoin in German Law and/or Tax databases except for that one snippet from BaFin.
So what I think and what you think is highly, to the utmost level, irrelephant - as long as noone as shit on writing from their Finanzamt, Bundesbank or something.

So I have my lawyer and my tax guy (Steuerberater) on that case, we will probably meet up with the bosses of the local IRS branch (Finanzamt) and try to make an arrangement.

Wish me luck :-D

legendary
Activity: 2282
Merit: 1050
Monero Core Team
June 10, 2012, 03:34:09 PM
#37
wareen,

nice find. However, I think your conclusion is premature. The document and other references do not mention VAT. So the only thing it means that if you pay with bitcoins, or as a merchant accept bitcoins, you do not need a permit in Germany. Which is good. However, it still leaves the question of VAT open. I lean towards the conclusion that the current laws in Germany classify the usage of Bitcoin as barter (Tauschgeschäft) and is subject to VAT. But I'm not a lawyer :-).

Thanks wareen for this.

IANAL I disagree the key conclusion is that Bitcoins are financial instruments (Finanzinstrumente) even though Bitcoin does not meet the narrow definition of e-money under the EU directive. This then makes Bitcoins not subject to VAT as financial instruments themselves are not subject to VAT.
donator
Activity: 544
Merit: 500
June 10, 2012, 02:22:22 PM
#36
wareen,

nice find. However, I think your conclusion is premature. The document and other references do not mention VAT. So the only thing it means that if you pay with bitcoins, or as a merchant accept bitcoins, you do not need a permit in Germany. Which is good. However, it still leaves the question of VAT open. I lean towards the conclusion that the current laws in Germany classify the usage of Bitcoin as barter (Tauschgeschäft) and is subject to VAT. But I'm not a lawyer :-).
legendary
Activity: 910
Merit: 1001
Revolutionizing Brokerage of Personal Data
June 10, 2012, 04:37:28 AM
#35
According to BaFin, the German Federal Financial Supervisory Authority, Bitcoin is a token of value intended as a method of payment. This is the official statement of BaFin regarding Bitcoin and the limits of the e-money definition from 22nd of December 2011 (in German):
http://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Merkblatt/mb_111222_zag.html

It's somewhat difficult to translate legal texts, but here's a try:

Quote
Factual limits of the e-money definition in the ZAG:

The term e-money was created in accordance with EU legislatory guidelines which cover only parts of the economic phenomenon of e-money. Regardless of whether computer-, server- or card-based electronic tokens function as money in the economic reality, e-money exists only when they are issued in exchange for an amount of money. Only legal tender or other privately issued payment methods which themselves qualify as e-money according to the ZAG are covered here. Hence, by definition, e-money always derives from legal tender or other e-money.
Tokens of value meant to be used as a method of payment which are issued by barter-clubs, private exchange-rings or other payment systems in exchange for real economic goods or services or like for example Bitcoins, which are issued in computer networks without any service in return, are therefore exempt from the definition of e-money, even though they fulfill the same economic function as e-money and have the actual potential of privately issued currencies.

...

Permission-free are only the usage of such tokens of value as a form of payment and their creation. If these tokens of value are themselves used as a commercial subject, the transaction is classified as either a banking business or a financial service, depending on the exact nature of the transaction. Such transactions are principally subject to reservation of authorization. These tokens of value are units of account and qualify therefore readily as financial instruments.

I left out the references to the other German laws and don't quote me on the exact wording but you should get the idea.

From my understanding this officially confirms that Bitcoin is in fact a valid method of payment not subject to VAT, but requiring a banking license or at least a license as a financial service provider as soon as you do anything else with them except mine them or directly pay/accept them for goods or services. This especially concerns holding or transmitting Bitcoins for other people in any form (ie. online wallets, tipping platforms,...) and of course all exchanges.

As much as I dislike the thought of a lot of current Bitcoin sites and business ideas becoming almost impossible to do legally under current German (EU?) law, classifying Bitcoin as a form of payment treated similarly to any other foreign currency but allowing everybody to mine them is probably the only sane way to go from the perspective of the legislators.
member
Activity: 107
Merit: 10
https://bt.cx
June 09, 2012, 06:00:21 PM
#34
In Sweden a "virtual service or work that you receive virtual money for, which can be exchanged for real money" is treated under the normal tax laws, which means that "virtual money that can be exchanged for real money" also should be treated under the normal tax laws, and therefore should virtual money be VAT free.

They can't both have virtual work with IRL tax, and virtual money without IRL tax.
legendary
Activity: 2282
Merit: 1050
Monero Core Team
May 19, 2012, 03:57:28 PM
#33
I have tried to sort out what applies regarding Bitcoin and VAT in Sweden and since some of the rules regarding VAT are harmonized within EU I thought that I'd share this in order to get some feedback from other EU citizens. These are my conclusions (I'm not an expert in this field so feel free to point out any errors or terms that I use incorrectly):

 * Finansinspektionen ("Financial Services Authority"?) in Sweden tell me that they do not consider Bitcoin a currency.
 * The Swedish Tax Agency tell me that I should treat Bitcoin as an "electronic service".

Everything that is delivered electronically is considered a "service" instead of a "commodity", there are a few differences in taxation but I don't think that's what's important here. What's important is that since Bitcoin is not considered a currency a purchase with bitcoins will be considered barter. In barter, one should look each transaction separately so that if e.g. a customer (private individual) buys a table from a company and pays with bitcoins these 2 transactions should be considered:

 1. The customer bought a table from the company
 2. The company bought some bitcoins from the customer

I the first transaction VAT is added by the company and recorded as output VAT. In the second transaction there is no VAT since the purchase is from a private individual. Later when the company wants to get rid of the bitcoins this will be considered a sale of bitcoins (regardless of whether they are exchanged for some currency or if something is bought using them) and then VAT should be added to the sale and recorded as output VAT.

From what I can understand this is a bit problematic. It will be hard for the company to exchange the bitcoins since they must add VAT (in Sweden this is 25%) to the "sale". No private individual will buy at that price since they can buy from eachother with no VAT. Some other company could possibly buy them since they can deduct the VAT but at some point some company will have to return the bitcoins to an individual.

Have other people in the EU reached similar conclusions? If my conclusions are correct it is a pretty big obstacle in getting merchants to start accepting Bitcoin.

For Swedish readers, I have started a similar topic in Swedish at bitcoin.se.

There is a very critical flaw in this argument especially in the case of Sweden. The "private individual" is no longer a consumer but is in fact a business that is selling Bitcoin and has to register for VAT. Sweden has in fact one of the lowest minimum thresholds for VAT/GST registration in the OECD http://www.oecd.org/dataoecd/12/12/34674438.xls at 30000 SEK or approx 840 BTC at current rates!  In a Bitcoin only economy every transaction would have equally compensating input and output VAT credits and equal amounts of VAT charged by each party effectively negating the VAT.

The bottom line if that if the tax authorities choose to treat Bitcoin as a "digital service" they have essentially created a huge loophole for VAT avoidance simply by registering for VAT and then using Bitcoin for every transaction.
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