When it comes to bitcoin, Europe’s highest court and the US’s major tax agency don’t agree on exactly what it is.
In a decision last week, Europe’s Court of Justice effectively decided that bitcoin is a currency, and therefore transactions in which bitcoins are exchanged for other currencies are exempt from value-added taxes. All exchanges relating to bank notes, coins and currencies are exempt from value-added taxes under European law. (Full judgement is available here.)
In laymans terms, the EU’s highest court thinks that virtual currencies like bitcoin are essentially the same as other currencies.
There’s a different view across the pond. Last year, the IRS decided that bitcoin is essentially is property for tax purposes. Separately, the US Commodity Futures Trade Commission last month argued that bitcoin is a commodity like gold or silver, and as such fell under its own regulatory purview.
As Dow Jones Newswires note, the decision by the Court of Justice eliminates some uncertainty over the treatment of bitcoin within the EU. “While the UK’s tax authority had taken the position that bitcoin is a currency, tax authorities in some countries, such as Sweden and Germany, had argued that it should be treated more like a commodity, making transfers of it subject to sales taxes,” Dow Jones reported.
But the differing approaches of regulators in the EU and the US highlight the ongoing uncertainty faced by both governments trying to manage the growth of the cryptocurrency and the myriad start-ups, investors and companies eager to incorporate bitcoin into their businesses and portfolios, while staying on the right side of the law.