In our Blog from 12.12.2017 we have already commented on the income tax treatment of Bitcoin investments.
In a letter dated 27 February 2018 (III C- 3 - S 7160-b/13/10001), the Federal Ministry of Finance commented on the VAT treatment of Bitcoin and other virtual currencies. It refers to a ruling by the European Court of Justice (ECJ) from 22 October 2015 (C-264/14, Hedqvist). According to this judgement, the exchange of conventional currencies into Bitcoin and vice versa is exempt from VAT as a service in return for payment.
The letter explains the tax treatment of various transactions in connection with bitcoins:
The Exchange in bitcoins and vice versa falls under the exemption for transactions with legal tender as other services.
The Use as a means of payment is not taxable and is therefore not subject to VAT. The consideration is to be measured according to the equivalent value in the currency of the member state in which the service is performed and at the time at which it is performed. The conversion at the last published selling rate must be documented by the supplier. This applies to both Bitcoin and other virtual currencies.
The Mining is not taxable. Neither the transaction fee that a miner receives from other users nor the remuneration in the form of new bitcoins constitutes remuneration that is paid as part of an exchange of services.
Provided that providers for digital Wallets (wallets in the form of an app or similar) charge fees, this constitutes a taxable and taxable supply if the recipient of the service, the wallet holder, is based in Germany.
With Trading platforms a distinction must be made as to whether the operator provides a marketplace - in which case the remuneration is taxable and subject to tax - or whether the operator acts as an intermediary - in which case a tax exemption applies.
