Whilst Hedqvist’s lawyers are finalizing the formal proceeding to the Court of Justice of the European Union received on the case is C-264/14, Belgium Tax Authority (Service Public Fédéral Finances) answered to Belgacoin (www.belgacoin.com) about VAT on bitcoin, litecoin and dogecoin with a ruling (GTVA20141533/TL/MP emitted on 05/09/2014).
The Tax Authority preliminary considered Bitcoin as a “virtual payment system”.
The Belgium VAT code exempts (Art. 44, § 3, 7°) the transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments, but excluding debt collection and the Tax Authority retains that the virtual payment system fall under this exemption deeming “virtual payment system” equivalent to “receivables, securities and other effects.”
The ruling takes into consideration the discussion in the VAT Working Group of the VAT exemption of virtual payment system and states that the situation could evolve in different ways and with different interpretations but, however, any new interpretations will not be retroactive.
The actual situation is that Member States continue to rule on VAT on bitcoin, while waiting for Decision of European Court of Justice.
I can summarize the alternative reasons to sustain VAT exemption on bitcoin, starting from the assumption that the purpose in exempting financial services from VAT in Article 135.1(b)-(g) is to avoid the difficulties which occur when imposing VAT on financial services:
- Legal tender is not compulsory for VAT exemption of currency, so bitcoin can be considered equivalent to money under VAT Directive.
- Bitcoin can be considered as a system of payment so the transactions of bitcoin fall under the exemption concerning debt and other negotiable instruments.
- Bitcoin can be considered as an “other security not representing good” under the VAT Directive as this concept does not refer to ‘security’ in relation to a financial security such as a share or a bond but it can refer to “a document (security) that does not represent goods”.
Stefano Capaccioli is CPA, Auditor, Tax litigator, Tax Advisor, Business Consultant, Specialized in Law & Tax on Gold, Precious Metals and Cryptocurrencies (www.coinlex.it). Arezzo, Tuscany, Italy.