Bitcoin and taxes

Dr Aleksandra BalInternational Bureau for Fiscal Documentation (IBFD) Amsterdam

Bitcoinference 201522 February 2015

Agenda

Bitcoin status Bitcoin and income

taxes Bitcoin and VAT

2

Bitcoin status Money in economic sense

Medium of exchange Unit of account Store of value

Money in legal sense Central management Legal tender status Physical carrier

Electronic money Link to traditional monetary

system Identifiable issuer

3

Bitcoin status

4

Tax authorities’ views on Bitcoin status

United States

property

Australia neither money nor a foreign currency but an asset

Netherlands not: legal tender, financial product, electronic money

Denmark not currency

Norway asset not currency

Finland not: currency, security or financial product

Finland currency

Bitcoin and income taxes Income tax rules vary from country to country.

Some countries tax everything (e.g., the United States), whereas others only selected types of income (e.g., Netherlands).

5

Types of transactions relevant for income tax purposes

Exchanges of bitcoins for legal currency

Exchanges of bitcoins for other goods and services (barter)

Bitcoin mining

Distinction: business activity versus transactions performed in private capacityLong- vs. short-term capital gain

Types of transactions relevant for VAT purposes

Exchanges of bitcoins for legal currency

Exchanges of bitcoins for other goods and services

Bitcoin mining

Bitcoin and VAT

VAT is harmonized in the European Union. The Court of Justice of the European Union is the supreme court in VAT matters.

VAT is levied on supplies of goods and services for consideration

6

Bitcoin and VAT

VAT exemption for bitcoin transactions?

Article 135 of the VAT Directive: Member States must exempt:(d) transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments;(e) transactions, including negotiation, concerning currency,bank notes and coins used as legal tender, with theexception of collectors' items…

7

Bitcoin and VATTax authorities’ views on VAT exemption

8

Exemption No exemption

Belgium Norway

Finland Estonia

United Kingdom (exceptions)

Australia

Singapore

Referral to the Court of Justice of the European Union:Case C-264/14, Skatteverket v. David Hedqvist

9

Bitcoin and taxes

Dr Aleksandra BalE-mail: a.bal@ibfd.orgPhD thesis “Taxation of virtual currency”: http://hdl.handle.net/1887/29963Summary of research on virtual currency: https://www.youtube.com/watch?v=3PDi-ZTMCHY