Bitcoin transactions are exempt from value-added-tax (VAT) in Spain, says Spanish tax lawyer Alejandro Gómez,
The General Directorate of Taxes, a subsidiary of the Spanish taxing authorities, made the statement in a response to a request from Gómez.
According to Gómez, the consultation found that Bitcoin payments were a form of financial service and thus exempt from VAT under the Council Directive 2006/112/EC of 28 November 2006.
A translated version of the consultation concludes,
“Therefore, we can conclude from the Granton Advertising judgment, that of the concept “other negotiable instruments” under the article 135.1.d) of the Council Directive 2006/112/EC, is closely related to payment instruments, which allows the transfer of money. Consequently, those financial services shall be deemed to be VAT-exempt.
“Virtual currencies, such as bitcoin, work as means of payment and, considering its features, shall be considered under the concept ‘other negotiable instruments,’ so its transmission is both liable and exempt from Value Added Tax (VAT).”
The exemption could be huge for the country’s large Bitcoin community, as it means an end of the possibility of double taxation on Bitcoin transactions. Bitcoin payments will not be taxed as a commodity and taxed only once for related services if it is from company.
Spain’s tax authority, Agencia Estatal de Administración Tributaria, has said very little on the subject of Bitcoin and taxation in the past. Its only announcement was in May of last year, in which it said it was monitoring the use of the digital currency for its potential use by criminals.
VAT and Bitcoin around Europe
VAT and bitcoin have been a heavily dreaded subject among supporters of the digital currency because of the potential of treating bitcoin like a commodity and, thus, Bitcoin transactions being taxed twice – once for the service and once for being a commodity. And as with all things cryptocurrency and law, whether VAT should be applied twice to Bitcoin transactions has been very unclear.
The European Union has yet to make a decision, but many member countries already have. Estonia and Poland’s tax authorities both have made statements saying Bitcoin transactions are not exempt under Article 135.1.e of the directive 2006/112/EC.
However, England and Germany’s tax authorities have said Bitcoin transactions will not be treated to a VAT, stating that the digital currency is either another form of currency or a financial service. Many major European countries, including France and Sweden, have not made statements about the subject yet.
An Allen and Overy Lawyer
Gómez is the founder of lawandbitcoin.com, a website dedicated to news about how law is applied to bitcoin all over the world. He received a double Masters in Law Practice and Tax law from IE Business School in Madrid.
He previously interned with Ernst & Young and Gómez-Acebo & Pombo, but now works for the international law firm, Allen and Overy. The firm is headquartered in London, but Allen and Overy has offices in Europe, the Americas, Asia, Australia, Africa and the Middle East.