In a ruling that will help support Bitcoin and other digital currencies, the highest court in Europe (European Court of Justice) has stated that bitcoin and other virtual currency transactions should be exempt from expensive value added taxes (VAT). The ruling comes after a disagreement in Sweden over the decision to exempt bitcoin from VAT.
In its decision, the Court of Justice said bitcoin transactions should be treated in the same way as fiat currency. Commenting on the decision, Richard Asquith, VP of global tax at tax compliance firm Avalara said,
“The next stage will be receiving regulatory compliance approval from national banks. Today’s ECJ ruling will help lay the path to this. It will also give the wider general public the confidence to adopt digital currencies for their day-to-day use. Retailers and payment platforms will now likely step-up their investment in bitcoin management in anticipation of this.”
To date, Bitcoin and digital currency regulation has been treated differently by each country. With each country taking their own approach, differences in regulation have emerged around the world, making it difficult for start-ups and existing players to maintain compliance and use digital currencies as a part of their payment mix. With this ruling in place, at least in Europe the regulatory environment will become easier for users of digital currencies and could serve as a precedent for future regulation globally.
Overview by Tristan Hugo-Webb, Associate Director, Global Payments Advisory Service at Mercator Advisory Group
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