New EU VAT rules and bitcoin businesses

The issue that has recently gathered a lot of attention of various news websites is the new EU VAT rules and their impact on bitcoin transactions. Under those rules, as from 1 January 2015, all supplies of electronic services (i.e. digital goods) to private individuals in the European Union are subject to VAT of the customer’s country. This means that the supplier has to establish the place where his customer is located to account for VAT on such transactions.

Whereas the provision of information on new tax developments is a positive phenomenon, an average bitcoin user will, at least, become very confused after reading all this information circulating on the Internet about the new VAT rules.

The majority of the news reports predict that the new EU VAT rules will cause a lot of trouble for bitcoin businesses. This is an accurate prediction as there was no need to determine the customer’s location in EU transactions under the previously applicable legislation. The new EU VAT rules are also said to be a disincentive for companies to accept bitcoin or a threat to preserving anonymity in transactions. Already worried about compliance issues and other possible negative impact of the new legislation, an average bitcoin user will get even more scared after reading on one website that “EU tax law could make bitcoin transactions invalid”.

However, there is also good news: the Bitcoin News Service website (NewsBTC) does not seem to share the general concerns that the new rules will harm bitcoin businesses. In an article “Do EU VAT Rules affect Bitcoin? Not really”, it reads that if the residence of the customer can be established on the basis of his IP address, “using a potentially anonymous method of payment like Bitcoin shouldn’t pose a problem.”

Some of the news reports referred to above can be found here: – leading Bitcoin News source since 2012