Topic: Bitcoin and VAT in the EU - page 2. (Read 21428 times)

I'd like to confirm that the Finnish tax revenue service has given me the green light to start my brokering service. The main question was am I, or am I not buying/selling bitcoins to/from my own pocket. I'm not because my system automatically trades for my clients using Gox/Sango etc. I'm never selling from my own pocket. This is why they allowed me to add VAT to the brokering fee alone, not the total value of bitcoins involved.

My site will actually go up in just a couple of days so the good news came at an opportune time.

Something relevant to the topic:

http://www.out-law.com/en/articles/2012/may/vat-to-be-charged-on-the-issue-of-phone-cards-says-minister/

A quote, read the link for more:

"Single purpose face value vouchers will be taxed when they are issued. A single purpose face value voucher is one that carries the right to receive only one type of goods or services which are all subject to a single rate of VAT.

According to HM Revenue & Customs (HMRC) prepaid telephone cards that can only be used for making calls, electronic download vouchers which can only be redeemed for downloads, electronic apps, file streaming or other electronically supplied services, group discount vouchers which are redeemed for a specific service or goods and vouchers for admission to amusement parks which cannot be exchanged for other goods and services in the park will all be caught by the new rules.

There is no change to the treatment of face value vouchers that can be used to buy more than one type of good or service. For example a book token that can be redeemed for zero rated books or standard rated e-books, will not be a single purpose voucher as it can be redeemed for more than one type of supply and they have different rates of VAT."

What I don't understand is how it is when the voucher code is issued by a non-EU company (for example MtGox Tibanne Ltd Japan), but sold to a customer in the EU?

@TechnoMage: I just reread your earlier post, and if the gift card analogue does not hold, then your scheme of selling a brokering service will not stand either : Then it is Mt. Gox (or you as local reseller) that would have to add VAT on the product. But again, it is not bartering...

@psy: gift card analogue again - at least in DK you are not obliged to "buy back" a gift card. Whether, on the moving price issue, we need to check this... An accountant friendly question could be if you may issue non price fixed value cards ? (like my earlier cheap Wednesday, expensive Saturday example) You could of course, in a shop setting, implement this as a coupon with different discount on different days, again some questioning to do

libcoin, my main point wasn't about the fixed rate. I think the main detractor is that you would be responsible, or the merchants who decide to accept bitcoin, to refund with hard currency, Euros in the case, anyone who wanted to sell bitcoins. Or are you thinking that the only bitcoins mechants would need to be responsible to give the money back are the ones that are actually sold? It could be fairly easy to do that, at least on the "bitcoin gift card" sellers side, given that all the addresses and respective balances are public and available on the block explorer sites. I'm just uncertain how merchants themselves, as the last link on chain, would deal with it.

It was nice of you to give the gift card example. Now i have one more way to look at it with my accountant, one which I haven't thought of before.

Sorry if what I wrote is confusing, English is not my native language and I'm certain some things just get lost in translation.

that's exactly the point most bitcoin users are missing (and will be for the longest time yet).
bitcoin is a means of MOVING value, not possessing / storing it.

quick OT:

i sell gold and silver via btc and am registered as a "small business" in germany

i use CyPay to forward my BTC to a site where I sell them for €.
for tax purposes, I just note the item, the BTC/USD and the EUR/USD of the sale. thus i can get numbers for my tax report.

i mainly registered because if you move less than 17600€/year, your expenses are deductible and you don't pay any taxes. above that, you can still deduct, but pay 25% speculation tax (special tax on gold/silver slaes) on the net profit (since I always pre- and restock, my expenses always equal my turnaround)

so I use the tax system to my advantage, steadily increasing my stock.

I'm very interested in hearing how the tax authorities respond to this idea. It is certainly logical in some ways. It makes 0 sense to tax Bitcoin as a regular good because it's really not good (pun intended) for anything else other than paying for other goods and services. If that really works then I'm considering doing something along those lines.

I need to probably contact the Finnish tax authorities on my situation as well. I need to make sure whatever I end up using works because I don't want to get in trouble. The brokering system I envisioned before is still my number one plan but I need to recheck on that and explore this gift certificate possibility.

@libcoin: I have to do some more reading on gift cards but I did find a similar explanation on a Swedish site. I find it really promising that they do have special rules for gift cards and it seems to be simply because a gift card is more similar to a currency than a good. For example, I found the following on a Swedish site (roughly translated):


It is easy to argue that bitcoins are used as a means of payment rather than a good so by that logic the authorities should be able to help us. I will send another mail to the Swedish tax authorities mentioning the comparison to gift cards.

@BitcoinTraderIT: Agree, but this is in fact the gift card setup... You buy the right to buy a good from some organization (bit-pay), but which good and when you buy it has not yet been decided. It is decided at the time of delivery, which also is the time where the VAT should be payed - the rationale from the Danish tax authorities is that you don't know at the time of buying which product you end up using your gift card for, and hence you don't know which VAT rate that will apply (in DK the VAT for newspapers and personal transport is 0, 25% for the rest, in Sweden there is another rate for e.g. food). So - bottom line: it is NOT a barter...

@psy: I don't think the fluktuating rate plays a role here. You could easily issue gift cards that would have a higher value on e.g. Wednesdays than on Saturdays (btw - could actually be smart... - need to check if it is actually OK...) the VAT would still be payed from the value of the actual good you buy. Just talked to our local accountant - VAT is for goods not for gift cards and other proof of value. Also note that a gift card in terms of accounting is listed as a debt - you owe the customer.

Finally - gift cards can expire, there is even (in DK) a law that states how long they can last. In that case there is no VAT(!) as there is no goods.

Anyway, the setup you propose - with guaranteed exchange rates, is one I am currently trying to setup

The problems regarding VAT, and the complexity of a barter situation can be avoided if the merchant uses a service like Bit-Pay. In that case the merchant will never receive any actual bitcoins. They receive payment for their goods in euros, krona or whatever. Bitcoin can then be thought of as a payment processor, like Visa.

The bolded part... That's the problem. Bitcoins would have to have a fixed value for that to happen. And everybody who would accept bitcoins would have to accept to pay back money for them for whoever wanted.
That would be nice in one way. Everyone would be an exchanger. But I'm not sure Bitcoin really is meant to be like that.
I can see the advantages of using such a system, I just don't see it happening. Who wants to take the risk of offering $x for each current and future bitcoin in existence?

Correcting what I said before - just found this decision from the Danish TAX authorities:

http://www.skat.dk/SKAT.aspx?oID=1537916

It states that a gift card is not considered a payment for goods before it is used. In the example mentioned in the link when a customer buys a gift card in a Danish shop the shop should not add VAT on it. The customer can then use the gift card in a Swedish shop for buying a pair of boots or to get his money back (!). It is only the Swedish shop that should deduce VAT from selling the boots.

So - gift cards are not barter...

First a disclaimer - I am speculating and reasoning - but I intend to check up on the gift card thing asap.

The expensive bitcoins you buy are great as they are already taxed - so you only pay the excl VAT price afterwards. If my reasoning stands, this also means that if you buy bitcoins at mt. gox they should in fact add VAT on these, just as if you buy an iTunes song or app.

I just read a bit up on this EU directive: http://ec.europa.eu/taxation_customs/taxation/vat/traders/e-commerce/article_1610_en.htm

It states a change in the rules from 2010: Taxation for electronic services is no longer at the country of origin, but in the country of the consumer. Hence there is no difference in in buying or selling outside EU as compared to internally.

As I see it - the important point is to ensure that a bitcoin trade will be seen analogue to the gift card example.

We need an EU clarification on this - And I would like to color the question with the gift card example, the same law should apply there too.

libcoin, do you know that that's how they handle VAT when accepting gift cards or are you just speculating? Seems to be that when the gift card is exchanged for dinner that would be considered barter.

I have a really hard time seeing that the authorities would accept the reasoning that the bitcoins didn't pay the dinner, that it was actually the exchange where I bought my bitcoins that is paying for dinner. Also, I still don't see in step 1 why any individual would pay 25% extra for bitcoins when they instead can buy it from another individual.

Maybe I'm missing something, I skimmed through your post rather quickly.

OK - just as an example:

Have a look at: http://www.oplevelsesgaver.dk/ (sorry, in Danish guys).

But they sell gift cards for different activities (dinner for two, spa, tastings, travels etc). You pay for the gift card to this shop, and then you later on use it (in another shop) to get a nice dinner for two. Following the analogy of D.H. This would mean that:
1. gift card of 100 EUR is sold to customer - VAT is 20EUR - gift card shop get 80EUR
2. gift card handed in at the restaurant - the price for the dinner is (the value of) the gift card
3. gift card is "sold" back to the gift card shop - for 80EUR, VAT is added - and the gift card shop can subtract that VAT

So - VAT is only added once - no problem. The issue is 2: The restaurant never sold the meal to the customer the meal was sold to the gift card shop!

This mean that if you run a closed loop, you can actually avoid the double VAT. So using bitcoins:

1. 20BTC is sold to the customer at the price of 25BTC as the VAT is added.
2. customer transfers the 20BTC to the restaurant for a dinner (they don't _pay_, they merely transfer them as a "gift card" to the shop keeper to show that they are the ones that were sold the right to a dinner from the gift card shop)
3. The restaurant then transfers the bitcoins to the gift card shop (your bitcoin selling site) as a proof that they did hand out a dinner to the customer, and hence executed the order (remember it is the gift card shop who bought the meal).

So, what happens if someone sells their bitcoins to someone else - well the same as if you sell a gift card to someone else. And if you sell it to a company, they will only pay you 80EUR for it. Unless they can somehow claim that it is a canceled deal where you get your money back.

Just a small twist - if the meal was sold to the gift card shop and contained bad oysters - the customers should make their claim against the gift card shop, not the restaurant, except if they made a contract with the gift card shop that they released them for all possible claims - I guess they do that today for gift card shops - so I guess you should do the same if you want to make solutions for merchants.

Sounds great! If they disagree with something that we have concluded in this thread, please make sure that they explain exactly what they think that we misunderstood and point us to some sources.

I'm going to sit with an accountant for a day or 2 and try to get to the bottom of this and I'll let you guys know the outcome.

I'm in Portugal and the accountant will advise me accordingly with the Portuguese law, but I'm almost sure that regarding VAT they should be the same for the whole EU, except for the VAT value itself, which varies.

Yeah, this sucks. But to the buyer there would be no difference between buying through Technomage and buying directly from Mt.Gox,, right? They might need to pay VAT either way.

Sounds like a plan. I have considered doing something similar but it seems that in Sweden you might need a permit from the Financial Services Authority to run even such a service (i.e. acting as a intermediary, forwarding someones payments etc.). You can apply for an exemption but even that costs some money and the market is very small in Sweden right now so I don't see that it's worth it.

But that's a bit off-topic, my main reason for wanting to get the VAT thing cleared up is to be able to tell Swedish merchants how to work with Bitcoin. I think that's absolutely necessary for Bitcoin to take off.

I am still not 100% certain this is the case. I wish it was this easy. If the purchase of Bitcoin from Mt. Gox is treated as an import, then the buyer needs to pay VAT. It might not be you (the broker) who withholds it but the customs office might decide to charge the buyer directly. I really hope this gets clarified soon :-(.

In other words, I tend to agree with you that you should only charge VAT on the service fee (in fact, I think you were the one who pointed out to me in a different thread that I hadn't considered this before). But that does not automatically mean that the buyer is off the hook for VAT.

This is a really interesting thread. I know of your site D.H. and as it happens, I'm launching a similar site in Finland right now. My site will have a service to buy and sell bitcoins so I can tell you how I've done it.

Basically I'm not going to be selling or buying bitcoins directly because I would need to add the 23% VAT to the total price. That would make prices ridiculous so it's not acceptable. What I'm setting up is a fixed price Bitcoin brokering service, which means that I'm doing the buying and selling at Mt. Gox / Intersango at the time of purchase and then I add a brokering fee to the price and this fee includes VAT.

There is no way around VAT, at least in Finland, but if I only sell a brokering service then I only need to add the VAT to the service fee.