Bitcoin Forum

I made an information request to the Estonian Ministry of Finance regarding Bitcoin taxing. I brought up the issue that it is pointless to start any bitcoin selling business in Estonia since it treats virtual currencies as property and thus requires Value Added Tax. Estonian VAT is 20%. I stated that Estonians would simply buy their bitcoins from Bitstamp instead of using a local business because a local business would have to add 20% VAT to the price of the bitcoins sold.

Here's a part of the reply I got from the Ministry of Finance:
http://s3.postimg.org/mxae0q64z/bitcoin_vat.png

The text says "Selling Bitcoins and NuBits on the Internet is handled as electronically provided service. Starting from the 1st of January 2015, all electronically provided services are taxed by the laws of the country where the service receiver is located. Thus, taxing a service in the European Union does not depend on the country where the business is registered but instead it depends on the fact where the service receiver is located. A service receiver from outside the union is taxed by a 0% rate."

This means that Bitstamp and others must soon ask VAT accordingly to the location of their customer whenever you are buying bitcoins. Essentially, now could be the time to hoard as many bitcoins as possible without paying some crazy 20% over the market price. Alternatively, the whole EU could come to a conclusion that virtual currencies are to be VAT-exempt. If the latter happens, then I'd guess we have no problem.

By the way, I asked specifically about NuBits because it is the first virtual currency ever that is not volatile and is always priced 1 NBT = 1 USD. To me, it makes no sense to tax the sale of nubits with VAT if essentially nubits are dollars. However, the financial ministry answered that the law makes no difference whether the asset's price is pegged to a certain monetary value or not, thus even nubits are currently taxed by VAT in Estonia. Things get more interesting when it comes to dividends paid on virtual currencies. For example, NuBit shareholders were paid 60000 peercoins yesterday (http://discuss.nubits.com/t/period-001a-dividend-distributed/688) as dividends for the first 2 months of success. I myself received 35$ worth of peercoins. I predict that taxing such gains will be another big problem for the lawmakers, since if I remember correctly --- dividends are generally not taxed at all.

http://s22.postimg.org/ktjlvlfpp/page_1.jpg (http://postimg.org/image/ktjlvlfpp/)http://s21.postimg.org/baqvbf79v/page_2.jpg (http://postimg.org/image/baqvbf79v/)http://s24.postimg.org/ljnw7a86p/page_3.jpg (http://postimg.org/image/ljnw7a86p/)
(the reply is all in Estonian and most of it is rather irrelevant in the context of Bitcoin's price speculation)

edit: changed the title a bit.

Clickbait Tilte, would not click again.

And I doubt anybody will be paying VAT for trading Bitcoins anytime soon, at least not in practice.

So what title would you suggest? The law is the law. You will be amazed when Bitstamp gets scared by the law that will become reality in the beginning of the next year. If they don't comply they will be shut down. Thus, they will comply and start asking 20% tax on all bitcoin sales.

Perhaps something like "Bitcoin could be subject to VAT for some of us soon."
 
I think that once an exchange charges VAT it can pretty much shut down as long as there are other ones which do not. I also don't see how this is relevant to Bitstamp, it's not in Estonia.
Yes I know if a good is "exported" to another country in the EU VAT for that country has to be charged, in theory. But do you really think anybody will pay that as long as there is a way to circumvent it, especially considering how easy it is?

Ok changed the title a bit. Fact is that there are powerful entities that would love to shut down Bitcoin businesses. You think they don't use an opportunity when they see one? That's why Bitstamp has gone crazy with their customer verification policy lately, they are scared. Even if it does not make sense to pay VAT on bitcoins, evading taxes is a crime. How exactly would you buy bitcoins without paying VAT then? I'm honestly interested in that. You go to some neighbouring country or use a VPN?

Use an Exchange which doesn't care probably. Of course it really depends on how widespread that VAT for Bitcoins thing really is. If it's EU wide (which I doubt since Germany has published that "Bitcoin is considered private money" letter) I'd be starting to be concerned.
But even then I think there would be "services" for "smuggling" Bitcoins over the Internet.

Of course I agree that a wide spread VAT on Cryptocurrencies would prevent Bitcoins usage as a money substitute.

OTC FTW.

No taxes, no fees.

Edit: Did I mention anonymity?

The only logical step forward is that all cryptocurrencies would be declared VAT exempt or "foreign money". If we have Finland and Germany backing this option already then we have hope. The question is whether such a declaration will be presented by the 1st of January 2015 or later. If it will be later then there will be a legal trouble gap where Bitstamp and others could be shut down for not taking service receiver location dependent taxes.

If cryptocurrencies get a status of a foreign currency then there will also be legal troubles as anyone who makes a bitcoin transaction would be labelled as money transmitter and thus KYC and AML laws start applying.

Regarding OTC trades, localbitcoins would probably be left out from this tax law equation? However, if cryptocurrencies become defined as foreign currencies then are OTC trades even legal any more? Can a random guy on the street exchange euros and dollars for you in the alley?

It's best done behind closed doors.

Cannabis is illegal in most places but it is still widely consumed. Only fools smoke it in public.

Doesn't make any sense. Well, some countries and/or legislations are going to put some rather stupid laws into effect, there's little we can to do prevent that! So we'll just have to see until people realize that those regulations don't make any sense and they are toppled in the end.

What I get from this is that if you buy a Bitcoin, you automatically lose 20% on your investment. Why would the price rise? It'll just be a larger absolute tax and there is no offsetting an exchange collected tax by raising the price. This makes no sense except when you said that EU people might have to get Bitcoins very soon to get in before the tax goes into effect.

Sucks to be EU  :-\

As far as I am aware there is no VAT charged between  EU countries when sending physical goods. Heck you don't even need a customs form.

As for BTC, which EU countries treat it as a taxable good now (VAT, no Capital Gains)? Again AFAIK, most countries are moving away from this if they have not already. UK backed away from this idea months ago
I think there is a misunderstanding here. If I buy BTC in the UK I don't pay VAT, so in this instance buying from Slovenia, they would not charge VAT. That is what this message states ... I am the receiiver, BTC is not 'VATable' here, no problem.
Sure, having a BTC business and conducting all your activity in Slovenia is not going to work, but for anyone else they will remain subject the the existing VAT laws in their own countries.

Am I missing something? Or does this just mean Slovenia has daft regulations for its own residents? And is saying that it will comply with any other EU countries which have equally daft laws already in existence or add them in the future?

For those of you in the EU, 20% VAT certainly sucks, but at least you're not dealing with the IRS.  U.S. citizens seem to ignore the fact that all payments made in Bitcoin must be reported to the IRS.  It's no different than exchanging a stock certificate for a stereo.  Surprised more wasn't made of this when the IRS made their ruling.  This basically makes BTC useless as a currency if you're a U.S. citizen who intends to not run afoul of the IRS.

Here in Slovenia we don't pay any tax for trading BTC (just like FOREX trading), but we do pay if bitcoins were mined by us ( from 17 to 50%). Hope this stays like this, as I do not mine any longer.

answer

MINING, untrackable and untaxable

The only information I get from this is that if you live in an EU country that already charges VAT on BTC purchases (list anyone?),  Slovenia will force you to comply with that tax law if you buy from a Slovenian exchange/business (are there even any?)

Not valid for EU in general. In Germany, no VAT on Bitcoin, Bitcoin gains are completely tax free after 1 year of hodling. Additionally, we have beer :)

TL:DR???

This wikipedia page about bitstamp seems uncertain where its actually located. It says it started in Slovenia but might be registered in the UK now.

The company is registered in Reading in the UK, but this is in fact just the offices of UK PLC, a company specialising in company formation and which, amongst its services, allows companies to use its own address as their registered office, effectively acting as a forwarding address. There is no clear information available as to where this company is based or whether they actually have any presence at all in the UK or are still run out of Slovenia

http://en.wikipedia.org/wiki/Bitstamp

The bitstamp website gives ths address.

BITSTAMP LTD. 5 Jupiter House
Calleva Park, Aldermaston
Reading
Berkshire RG7 8NN
United Kingdom

However, a UK company search for bitstamp at the link below gives this address.

Name & Registered Office:
BITSTAMP LIMITED
5 NEW STREET SQUARE
LONDON
UNITED KINGDOM
EC4A 3TW
Company No. 08157033

http://wck2.companieshouse.gov.uk//wcframe?name=accessCompanyInfo

When sending package from one country to another in the EU then this may be so. However, VAT also means the tax that is taken when you buy anything from a shop. For example, if you go to your local computer hardware shop and want to buy a computer then you have to pay +20% of the actual price if you are a consumer. According to the law, the same goes to bitcoin. This means that all bitcoin ATMs must take +20% of the actual price.

In which EU countries?
I think you are mistaken in your opinion that this is EU wide (that's how I interpret your position)

eg UK ...
http://www.inniaccounts.co.uk/2014/03/bitcoins-tax-guide-uk/ (http://www.inniaccounts.co.uk/2014/03/bitcoins-tax-guide-uk/)


Please provide sources for your claim as your Slovenian article certainly does not support your pan-EU allegation.
Not trying to be a pain in the arse, but if you are in fact correct, it does have big implications, so I get why you are bringing it up.

I don't know about other EU countries but in Estonia this is the case. From the letter I personally understand that this service-receiver-location-dependent-taxing will be EU-wide law starting from 1st of January 2015. I deduce that from the fact that if the law was not to manifest EU-wide then the letter from the Ministry of Finance would not state EU so many times everywhere :D


It has big implications in a sense that Bitstamp would have to check if a customer is from Estonia and then charge additional 20% VAT on the sold bitcoins. It would be reasonable to think that Estonia is not the only EU country that has sales tax / turnover tax / value added tax on everything you can buy. However, at this point I am not aware of any other country that has similar laws. I hope I made myself clear. The VAT discussions can get confusing because it is also used to tax things when you buy them online from another country to protect the local market. However, in Estonia VAT is also taken on absolutely every item you can buy from a store (bread, clothes and what not).

edit:
I do suspect that Estonia might also consider Bitcoin VAT-exempt because Finland did it and Estonia is closely related to Finland. IF all countries considered Bitcoin VAT-exempt then there would be no problem for anyone. The law about service receiver's location is a bit worrisome though because bitcoin exchanges would then have to differentiate customers by their country and apply different tax laws to them based on their location.

Thanks for clarifying your position Hyena - let's wait and see   ;)