Topic: Bitcoin and VAT in the EU - page 3. (Read 21428 times)

There is actually a difference between bartering goods, and bartering services (or barter a good for a service). "A Lawyer's Take On BitCoin And Taxes" by Trace Mayer, J.D. explains some differences, but it's a US centric analysis. In EU it might be different. For example, as you mentioned, the place of delivery is influenced by that. Merely because Bitcoin is transferred electronically it does not follow that selling bitcoins is a provision of service. It depends on how the regulatory body interprets it

In other EU countries, as far as I know, barter is not VAT exempt. The HMRC (UK tax office) for example claims this on their website.

If we would actually bring the miner into all of this, wouldn't that simply be considered an intermediary? From my link: "B2C services provided by an intermediary are taxed at the location where the main transaction, in which the intermediary intervenes, is taxable".

But the other part of my quote that I think deserves some more discussion is: "The supply of services between businesses (B2B services) is in principle taxed at the customer's place of establishment, while services supplied to private individuals (B2C services) are taxed at the supplier's place of establishment.". To me that means that if I sell to an individual I still have to add VAT. So I wouldn't be completely comfortable unless it is actually a foreign company that buys from me (one which doesn't directly connect me with a buyer).

Barter was exactly what I wrote about in the original post. Since BTC is considered a good (or actually an electronic service) a transaction where someone pays for something with bitcoins will be considered barter. But, at least in Sweden, you still have to consider VAT when you do barter, you simply treat it as two transactions. Are you really sure that that is different in Italy?

I'm not sure I understood your last sentence completely but the problem arises when a company wants to get rid of the bitcoins. The bitcoins are sold (either as barter or as exchanged for fiat currency) and then VAT must be added to the sale.

There is another option (at least in Italy): barter. If you consider BTC as a good you can do a barter with your goods. So no vat is due for the transaction. There is a limit on how much barter you can do if you've a VAT code (is a % of your total incomes).
There still be the problem that you pay VAT when buy the good that you resell and you can do a compensation on that, and that you risk to pay the VAT when change back the BTC.

As far as I remember, the rule for determining location is not specific to intra-EU trades. However, if you sell Bitcoins, it is unclear who the service provider is. It does not necessarily follow that the seller of Bitcoins is the service provider. Purely logically, it should be the miner that reaped the transaction fee. But this is determined randomly. So again it's unclear.

In other words, if you're VAT registered and want to sell Bitcoins to customers who are not, don't. Sell them on the exchanges that are outside of the EU. Then at least you can claim that you exported it and have no information about what happened afterwards. Sorry Intersango :-(.

Well, it's not like we can magically find something. One way that would fix this is to lobby for changes of laws, regulations, or just get an exception for Bitcoin from the respective regulatory institution. I know that some people are working on it (e.g. Boussac mentioned this in another thread, and some other people mentioned to me privately they are conducting similar efforts in their countries). The other one is to ignore this and expose oneself to prosecution.

Hey, you got to pay for the socialism somehow.

Paying VAT for every bitcoin transaction is a show stopper. I hope you manage to find good workarounds to this.

See this page that your page linked to (section "Supply of services").


Or does that just apply when both countries are within the EU? I'm not sure.

I don't think so, see http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/index_en.htm
It looks like it's the buyer that's relevant. But since the country of residence of the buyer is normally not known to the seller, this creates problems. Gox might need to charge VAT on their fees to EU customers (irrespective of whether Bitcoin is or is not VAT exempt), but this is unclear too, because some services provided by companies outside of the EU to EU citizens do need to charge VAT (see EU directive for VAT on electronic services) and some don't.

This is a complicated question because I move around and fall under taxation of multiple countries simultaneously. But my tax/legal research of Bitcoin is independent of my private business activities. It concentrates on EU but I include all the countries in the world that I could find references for. At the Bitcoin conference in Prague I spoke to several people who gave me some information about their own experiences, e.g. Pierre Noizat (AKA Boussac on the forum) from France, the Norwegian journalist Morten Most told me about his research, and Meni Rosenfeld told me about his experience in Israel.

Thanks for your answer! It's at least a good thing that we have reached the same conclusions.


That's interesting, sounds like good workaround. I did some quick reading about it and it seems to be important that the bitcoins are sold to a company abroad, not an individual. I am not exactly sure how things work with exchanges like Mt.Gox, do I sell the bitcoins to Mt.Gox. or to the person who placed the buy order?

Also, out of curiosity, what country are you from?

Hello,

I have been working on a paper about economics of Bitcoin for a while, and this includes taxation. My conclusions, for EU, are identical to yours, so it's encouraging that the official authorities also share the point of view.

I share your worry that VAT makes it problematic. You omitted a third option: a company buys goods from another company. In this case, based on my research, each company charges VAT and then deducts it from their VAT liability to the tax office. So the net tax result is zero, but there's more paperwork.

The most reasonable workaround, in my example: the company that wants to get rid of Bitcoins should sell them on an exchange that is located outside of the EU. Then they don't need to charge VAT, since it's an export.

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.