Bitcoin users do not have to pay value added tax (VAT) on bitcoin in Switzerland. The Swiss Tax Administration (ESTV) has announced there will be no VAT on bitcoin transactions, according to Bitcoin Association Switzerland.
The news brings hope not only to bitcoin users in Switzerland, but worldwide. Switzerland has a global reputation for financial security. Bitcoin supporters want governments to view bitcoin as a method of payment, not as a delivery of goods or a service subject to a VAT. Bitcoin supporters have noted that it will be difficult for bitcoin to become an accepted currency if bitcoin transactions are subject to VAT.
“This is excellent news for bitcoin in Switzerland as it provides the legal certainty we need to professionally operate our business,” said Niklas Nikolajsen, CEO of Bitcoin Suisse AG, a bitcoin brokerage.
Swiss bitcoin organizations called for clarification
The ESTV made its decision after three Swiss bitcoin organizations asked it clarify the legality of VAT in regards to bitcoin. The bitcoin organizations formally presented their request in February of 2014. ESTV addressed whether the transfer of bitcoins constitutes a delivery of goods or a service. ESTV decided that the transfer of bitcoins constitutes neither of these.
Switzerland treats bitcoins like any other means of payment. A bitcoin merchant does not charge VAT.
Paying for a pizza with bitcoins is not a barter trade, and therefore it cannot trigger double taxation.
Trading bitcoins for Swiss Francs is an exchange of legal tender against a non-official means of payment. The trade is no different than exchanging of Swiss Francs for Euros.
Transaction fees that bitcoin brokerages charge are exempt from VAT under article 21 section 2 of the Swiss VAT act.
‘Huge milestone’ for bitcoin
“Treating Bitcoin payments just like any other payment option is a huge milestone for the Swiss Bitcoin economy, and enriches the global digital money ecosystem,” said Bernhard Kaufmann, the general manager of Moving Media GmbH, a Swiss-based company that develops and operates Internet portals and ecommerce interfaces that are used to trade goods and services.
The Swiss decision gives hope to bitcoin supporters for the rest of Europe.
“We hope that the Swiss decision can serve as an inspiration for Europe,” said Mathieu Buffenoir, vice president of Bitcoin Association Switzerland.
The VAT issue remains pending before the European Union, to which Switzerland does not belong. The European Court of Justice will hear the question on June 17, according to Bitcoin.se.
Bitcoin Association Switzerland said the decision is only legally binding to the parties that wrote the inquiry. However, a different answer to others is unlikely thanks to the constitutional principle of equality before the law. “This decision could also be challenged in court, which no one intends to do,” the association states on its website.
Updated: June 12, 2015 at 3:56 pm CET.
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