Bitcoin Association Switzerland reports that, according to the Swiss Federal Tax Administration, no VAT applies to bitcoin in Switzerland. The transfer of bitcoin doesn’t constitute delivery of goods or services, and therefore it’s not subject to VAT.
“This is the most reasonable way to classify bitcoins in the context of VAT, and we are fortunate that the tax administration agrees with our view,” says Luzius Meisser, president of Bitcoin Association Switzerland. “Bitcoin is a currency, and thus should also be treated like a currency.”
In February 2014, a group of three Swiss Bitcoin organizations jointly wrote a formal inquiry to the Swiss Federal Tax Administration to clarify the legal situation of bitcoin with regards to VAT. The tax authority replied that bitcoin is to be treated just like any other payment option – trading bitcoin for Swiss francs is seen as similar to trading euros for Swiss francs. Furthermore, the transaction fees charged by bitcoin exchanges are VAT-free.
“This is excellent news for bitcoin in Switzerland as it provides the legal certainty we need to professionally operate our business,” says Niklas Nikolajsen, CEO of Swiss bitcoin exchange and service provider Bitcoin Suisse AG.
Other European nations have made similar decisions. Recently, the Spanish tax office confirmed that, under Spanish law, bitcoin has been recognized as a financial service, and therefore the cryptocurrency isn’t subject to the nation’s 21 percent VAT.
In the European Union, which Switzerland is not part of, there is not yet clarity on the VAT status of bitcoin. In June, however, the European Court of Justice in Luxembourg is expected to hold a hearing on the matter, Handelszeitung reports.
“We hope that the Swiss decision can serve as an inspiration for Europe,” said Mathieu Buffenoir, vice-president of Bitcoin Association Switzerland.
Bitcoin is now confirmed to be exempt from VAT in Switzerland, but other regulations apply. Switzerland considers digital currencies such as bitcoin equivalent to any other foreign currency. This means that the professional operation of bitcoin trading platforms constitutes financial intermediation with the requirement to comply with both the Banking Act and the Anti Money Laundering (AML) Act. Recently ECUREX, a digital finance marketplace for professional traders and financial institutions headquartered in Zurich, announced that it has become the first digital currency exchange platform to be fully compliant with both.
Switzerland, a modern country in the middle in Europe with a world-class financial system, a stable regulatory environment, and a thriving economy unencumbered by the often lengthy and ineffectual bureaucratic procedures of the European Union, is emerging as a good location for bitcoin businesses.
In related news reported by Handelszeitung, preparations are under way for the establishment of the first bitcoin bank in Switzerland, according to multiple sources in the financial sector. The bitcoin bank would be set up as a normal commercial bank connected to the banking network and compliant with the Banking and AML Acts, and able to offer all standard banking services. Bitcoin Magazine is following the story and will report in detail once more information is available.
Photo by Antana / CC BY-SA 2.0