1. Bitcoin and taxes Dr Aleksandra Bal International Bureau for Fiscal Documentation (IBFD) Amsterdam Bitcoinference 2015 22 February 2015

2. Agenda Bitcoin status Bitcoin and income taxes Bitcoin and VAT 2

3. Bitcoin status Money in economic sense Medium of exchange Unit of account Store of value Money in legal sense Central management Legal tender status Physical carrier Electronic money Link to traditional monetary system Identifiable issuer 3

4. Bitcoin status 4 Tax authorities’ views on Bitcoin status United Statesproperty Australianeither money nor a foreign currency but an asset Netherlandsnot: legal tender, financial product, electronic money Denmarknot currency Norwayasset not currency Finlandnot: currency, security or financial product Finlandcurrency

5. Bitcoin and income taxes Income tax rules vary from country to country. Some countries tax everything (e.g., the United States), whereas others only selected types of income (e.g., Netherlands). 5 Types of transactions relevant for income tax purposes Exchanges of bitcoins for legal currency Exchanges of bitcoins for other goods and services (barter) Bitcoin mining Distinction: business activity versus transactions performed in private capacity Long- vs. short-term capital gain

6. Types of transactions relevant for VAT purposes Exchanges of bitcoins for legal currency Exchanges of bitcoins for other goods and services Bitcoin mining Bitcoin and VAT VAT is harmonized in the European Union. The Court of Justice of the European Union is the supreme court in VAT matters. VAT is levied on supplies of goods and services for consideration 6

7. Bitcoin and VAT VAT exemption for bitcoin transactions? Article 135 of the VAT Directive: Member States must exempt: (d) transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments; (e) transactions, including negotiation, concerning currency, bank notes and coins used as legal tender, with the exception of collectors' items… 7

8. Bitcoin and VAT Tax authorities’ views on VAT exemption 8 ExemptionNo exemption BelgiumNorway FinlandEstonia United Kingdom (exceptions)Australia Singapore Referral to the Court of Justice of the European Union: Case C-264/14, Skatteverket v. David Hedqvist

9. 9 Bitcoin and taxes Dr Aleksandra Bal  E-mail: a.bal@ibfd.orga.bal@ibfd.org  PhD thesis “Taxation of virtual currency”: http://hdl.handle.net/1887/29963  Summary of research on virtual currency: https://www.youtube.com/watch?v=3PDi-ZTMCHY