David Hedqvist intended to buy and sell Bitcoins, a virtual currency, in exchange for Swedish Krona. Before commencing this activity he sought a preliminary opinion from the Swedish Tax Law Committee as to whether he would need to account for VAT. The preliminary opinion evaluated the activity as a supply of services for consideration, but a supply of services which was exempt from VAT, since Bitcoins are a method of payment that are used like legal tender. The Swedish tax authorities appealed this ruling and the Swedish Supreme Administrative Court referred two questions to the Court of Justice of the European Union.
Advocate General Kokott has now opined on this matter, as follows:
Even where a pure means of payment was not guaranteed and regulated, from a VAT perspective it fulfilled the same function as legal tender and in principle was therefore to be treated the same on the basis of the principal of fiscal neutrality. This meant that the case of First National Bank of Chicago (C-172/96) EU:C:1887:354 was applicable. Therefore, the exchange of a pure means of payment for legal tender and vice versa, which is effected for consideration added by the supplier when the exchange rates are determined, is the supply of a service effected for consideration within the meaning of Article 2(1)(c) of the VAT Directive.
Such transactions are exempt under Article 135(1)(e) of the VAT Directive (“transactions, including negotiation, concerning currency, bank notes and coins used as legal tender, with the exception of collectors’ items, that is to say, gold, silver or other metal coins or bank notes which are not normally used as legal tender or coins of numismatic interest”). Article 135(1)(f) (“transactions, including negotiation but not management or safekeeping, in shares, interests in companies or associations, debentures and other securities, but excluding documents establishing title to goods, and the rights or securities referred to in Article 15(2)”) was not applicable.
The judgment of the Court will follow in due course. Although the Court often follows the Advocate General’s opinion, this is not invariably the case.
At the time of writing the Advocate General’s opinion was not available in English, but other language versions are available on the link below.
Skatteverket v David Hedqvist (C-264/14)
This article appears in the JHA Summer 2015 Tax Newsletter, which also features:
You can download the complete newsletter as a PDF here: August 2015 – Tax Newsletter
