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Virtual Currencies, M-Payments and VAT: Ready for the Future?

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Bitcoin and Mobile Payments

Part of the book series: Palgrave Studies in Financial Services Technology ((FST))

Abstract

VAT is a critical factor for the success of Bitcoin and other virtual currencies. The EU Court of Justice has recently decided that bitcoins should be treated as regular money, at least for purposes of VAT. The author addresses the implications of this decision and considers which VAT related questions are still left outstanding for Bitcoin. He concludes with some remarks about the VAT aspects of m-payments.

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Notes

  1. 1.

    ECJ 22 October 2015, Case C-264/14, Skatteverket v David Hedqvist, ECLI:EU:C:2015:718.

  2. 2.

    Reference is made to Bitcoin, capitalized, for the system (the software and the network it runs on) and bitcoin, lowercase, for the currency itself.

  3. 3.

    Craig Kent Elwell, Maureen Murphy, Michael V Seitzinger, Bitcoin: Questions, Answers and Analysis of Legal Issues, Washington, Congressional Research Service, 20 December 2010, p. 1.

  4. 4.

    Goldman Sachs, Global Market Research, Top of Mind, 11 March 2014, All about Bitcoin.

  5. 5.

    An overview of such exchanges can be found at: http://bitcoincharts.com/markets/currency/EUR.html.

  6. 6.

    European Central Bank (October 2012), Virtual Currency Schemes, October 2012.

  7. 7.

    Francis Mann, The Legal Aspect of Money, Oxford: At the Clarendon Press (1971), p. 29.

  8. 8.

    European Central Bank (October 2012), Virtual Currency Schemes, p. 9.

  9. 9.

    Aleksandra Bal, Stateless Virtual Money in the Tax System, European Taxation, July 2013.

  10. 10.

    European Central Bank (October 2012), Virtual Currency Schemes, p. 10.

  11. 11.

    European Central Bank (October 2012), Virtual Currency Schemes, p. 13.

  12. 12.

    Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax. O.J. 2006, L 347.

  13. 13.

    The European Economic Community is more or less the predecessor of the EU. When the European Union (EU) was created in 1993, the EEC was transformed into the European Community (or EC), one of the EU”s three pillars (the other two were: the Common Foreign and Security Policy (CFSP) and Justice and Home Affairs (JHA), which was shrunk and renamed Police and Judicial Co-operation in Criminal Matters (PJC) in 2003). As of 1 December 2009 the Treaty of Lisbon made an end to the EU-pillar system; merging the EC with the other two pillars in a supranational system under the EU name.

  14. 14.

    Directive 67/227 of 11 April 1967, O.J. No. 71, repealed by Directive 2006/112/EC.

  15. 15.

    Directive 67/228 of 11 April 1967, O.J. No. 71.

  16. 16.

    Decision of 21 April 1970 on the replacement of financial contributions from Member States by the Communities” own resources, O.J. No. L 94, 28.4.1970, p. 19.

  17. 17.

    Sixth Council Directive 77/388/EEC of 17 May 1977, O.J. No. L 145 of 13 June 1977, p. 1, replaced by Council Directive 2006/112/EC (the VAT Directive).

  18. 18.

    We see this reflected in the full name of this directive: “Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment”.

  19. 19.

    Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax.

  20. 20.

    One could describe consumption as the process in which the recipient of goods or services changes these goods and services into something else.

  21. 21.

    ECJ 9 October 2001, Case C-409/98, Mirror Group, ECLI:EU:C:2001:524, paragraph 26.

  22. 22.

    ECJ 9 October 2001, Case C-108/99, Cantor Fitzgerald, ECLI:EU:C:2001:526, paragraph 17.

  23. 23.

    ECJ 21 February 2006, Case C-419/02, BUPA Hospitals and Goldsborough Developments, ECLI:EU:C:2006:122.

  24. 24.

    ECJ 14 July 1998, Case C-172/96, First National Bank of Chicago, ECLI:EU:C:1998:354.

  25. 25.

    Conclusion of Advocate General J. Kokott of 24 October 2013, Case C-461/12, Granton Advertising BV, ECLI:EU:C:2013:700.

  26. 26.

    The Dutch District Court (Gerechtshof) of Den Bosch.

  27. 27.

    ECJ 12 June 2014, Case C-461/12, Granton Advertising BV, ECLI:EU:C:2014:1745.

  28. 28.

    Memorandum opinion regarding the Courts subject matter jurisdiction (6 August 2013, Judge Amos Mazzant), US Securities and Exchange Commission v. Trendon T. Shavers et al., case number 4:13-cv-00,416, in the US District Court for the Eastern District of Texas.

  29. 29.

    See: IRS Virtual Currency Guidance: Virtual Currency Is Treated as Property for US Federal Tax Purposes; General Rules for Property Transactions Apply, https://www.irs.gov/uac/Newsroom/IRS-Virtual-Currency-Guidance (accessed 18 November 2015).

  30. 30.

    CFTC Orders Bitcoin Options Trading Platform Operator and its CEO to Cease Illegally Offering Bitcoin Options and to Cease Operating a Facility for Trading or Processing of Swaps without Registering, http://www.cftc.gov/PressRoom/PressReleases/pr7231-15 (accessed 18 November 2015).

  31. 31.

    This approach was put forward in: Revenue & Customs Brief 09/14, Tax treatment of activities involving Bitcoin and other similar cryptocurrencies, issued 3 March 2014, http://www.hmrc.gov.uk/briefs/vat/brief0914.htm (accessed on 18 November 2015).

  32. 32.

    In a letter dated 24 April 2014 from Dr. Michael Meister (Parlamentarischer Staatssekretär beim Bundesminister der Finanzen) on: Umsatzsteuerliche Behandlung von Bitcoins, see also: http://www.bundesverband-bitcoin.de/wp-content/uploads/2014/05/140512-Antwort-PStS-Meister.pdf (accessed on 18 November 2015).

  33. 33.

    Letter from Bundesminister Dr. Michael Spindelegger to the Austrian Parliament dated 22 July 2014, GZ. BMF-310,205/0115-I/4/2014.

  34. 34.

    By using the same mechanisms that were previously used in the trade of carbon rights, see: Redmar Wolf, The Sad History of Carbon Carousels. VAT Monitor 2010, no. 6.

  35. 35.

    ECJ 22 October 2015, Case C-264/14, Skatteverket v David Hedqvist, ECLI:EU:C:2015:718.

  36. 36.

    ECJ 14 July 1998, Case C-172/96, First National Bank of Chicago, ECLI:EU:C:1998:354.

  37. 37.

    Request for a preliminary ruling from the Högsta förvaltningsdomstolen (Sweden) lodged on 2 June 2014 — Skatteverket v David Hedqvist (Case C-264/14).

  38. 38.

    Opinion of Advocate General Kokott, delivered on 16 July 2015, Case C–264/14, Skatteverket v David Hedqvist, ECLI:EU:C:2015:498.

  39. 39.

    In the French version of the decision bitcoin is described as: “moyens de paiement” while legal tender is: “moyens de paiement légaux”. See: Redmar Wolf, Bitcoin and EU VAT. International VAT Monitor, October/September 2014, p. 254.

  40. 40.

    Revenue & Customs Brief 09/14, paragraph 4.

  41. 41.

    Letter from Bundesminister Dr. Michael Spindelegger to the Austrian Parliament dated 22 July 2014, GZ. BMF-310,205/0115-I/4/2014, paragraph 19.

  42. 42.

    As mentioned in Article 135(1)(f) of the VAT Directive.

  43. 43.

    See for instance: http://www.coindesk.com/price/.

  44. 44.

    ECJ 3 March 1994, Case 16/93, R. J. Tolsma v Inspecteur der Omzetbelasting Leeuwarden.

  45. 45.

    ECJ 5 June 1997, Case C-2/95, Sparekassernes Datacenter (SDC), paragraph 66.

  46. 46.

    This view is advocated by the UK tax authorities Revenue & Customs Brief 09/14, paragraph 2.

  47. 47.

    ECJ 5 June 1997, Case C-2/95, Sparekassernes Datacenter (SDC).

References

  • Bal, A. (2013, July). Stateless virtual money in the tax system. European Taxation. 53 (7), 351–356.

    Google Scholar 

  • Elwell, C. K., Murphy, M. M., & Seitzinger, M. V. (2013). Bitcoin: Questions, answers and analysis of legal issues. Washington, DC: Congressional Research Service.

    Google Scholar 

  • Mann, F. (1971). The legal aspect of money. Oxford: At the Clarendon Press.

    Google Scholar 

  • Wolf, R. (2010). The sad history of carbon carousels. VAT Monitor, 6, 10–17.

    Google Scholar 

  • Wolf, R. (2014). Bitcoin and the EU VAT. International VAT Monitor. September/October. 254–257.

    Google Scholar 

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Author information

Authors and Affiliations

  1. VU University of Amsterdam, Amsterdam, Netherlands

    Redmar A. Wolf (Senior Counsel, Baker & McKenzie Amsterdam, Professor of indirect taxes,Faculty of Law)

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  1. Redmar A. Wolf
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Editors and Affiliations

  1. University of Siena , Siena, Italy

    Gabriella Gimigliano

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Wolf, R.A. (2016). Virtual Currencies, M-Payments and VAT: Ready for the Future?. In: Gimigliano, G. (eds) Bitcoin and Mobile Payments . Palgrave Studies in Financial Services Technology. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-57512-8_10

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  • DOI: https://doi.org/10.1057/978-1-137-57512-8_10

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