The Court of Justice of the European Union has ruled that the trading of bitcoin and other virtual currencies will be exempt from VAT, it said on Thursday.
The EU Court of Justice said that virtual currencies should be treated as fiat currency and consumers should not be taxed when buying or selling them, it said.
The Financial Times reports the EU Court of Justice said that bitcoin transactions “are exempt from VAT under the provision concerning transactions relating to currency, bank notes and coins used as legal tender.”
The case follows a Swedish dispute between Sweden’s tax agency and David Hedqvist, who sought to set up a bitcoin exchange in his home country to allow people to buy and sell bitcoin using Swedish krona.
Hedqvist told Bloomberg that he initially sought a court ruling to clarify how virtual currencies should be taxed after he didn’t get clear answers from the Swedish Tax Authority.
“I got involved in this simply by asking for an advance ruling in Sweden because I wanted to start selling bitcoin on my site bitcoin.se,” Hedqvist wrote in a blog post in August 2014.
“It has now escalated and I find myself in a situation where my case will likely decide if and how VAT should be applied to Bitcoin throughout the EU.”
The Swedish tax authority sought answers from the EU Court of Justice on two specific questions:
“Is Article 2(1) of the VAT Directive to be interpreted as meaning that transactions in the form of what has been designated as the exchange of virtual currency for traditional currency and vice versa, which is effected for consideration added by the supplier when the exchange rates are determined, constitute the supply of a service effected for consideration?”
“If the answer to the first question is in the affirmative, is Article135(1) to be interpreted as meaning that the above mentioned exchange transactions are tax exempt?”
The news broke shortly after Nasdaq’s chief executive Bob Greifeld unveiled that the US exchange group will be using blockchain technology for corporate actions services on one of its European exchanges, reported Financial News.
Speaking at the Financial News Awards for Excellence in Trading and Technology, Europe in London, Greifeld said that Nasdaq will be using the blockchain to better manage and streamline the proxy voting process, an initiative that will first be tested on its Nasdaq’s market in Estonia.
“We are going to put that proxy voting on the blockchain, on the immutable ledger and obviously enable people to do this [vote] with their cell phone and have that record with them forever.”
“I certainly believe with the technologies we see, both with our companies and with the capital markets systems, we have a great opportunity to change this world in fundamental ways and I think everybody here in this room has some part to play in that.”
Image credit: European Court of Justice, Luxembourg, Wikimedia.