When it comes to Bitcoin, the European Supreme Court and the largest US tax authority disagree on exactly what it is.
In a ruling last week, the European Court of Justice effectively ruled that Bitcoin is a currency. Therefore, transactions in which Bitcoins are exchanged for other currencies are exempt from VAT. All exchange transactions for banknotes, coins and currencies are exempt from VAT under European law. (The full verdict can be found here.)
For laypeople, the EU Supreme Court believes that virtual currencies like Bitcoin are essentially the same as other currencies.
There is another view across the pond. Last year, the IRS ruled that Bitcoin is essentially tax-owned. Separately, the U.S. Commodity Futures Trade Commission argued last month that Bitcoin is a commodity like gold or silver and, as such, falls under its own regulatory remit.
As Dow Jones Newswires notes, the Court of Justice’s decision removes some uncertainties surrounding the treatment of Bitcoin within the EU. “While the UK tax authorities had taken the position that bitcoin was a currency, the tax authorities in some countries, such as Sweden and Germany, had argued that bitcoin should be treated more like a commodity so that the transfer of bitcoin is subject to sales tax.” Dow Jones reported.
However, the different approaches taken by regulators in the EU and the US underscore the ongoing uncertainty faced by both governments trying to control the growth of the cryptocurrency and the myriad startups, investors and companies using Bitcoin during their stay Want to include in their businesses and portfolios on the right side of the law.