Although Bitcoin has been in existence for quite a while, there is still uncertainty about its status and tax treatment. Is it money, a financial instrument or an asset (property)? In the majority of countries, there have not been any official statements on that matter.
If there are no official rules, taxpayers usually turn to the Internet for help. And they may find a lot of misinformation there: blogs, wikis and other websites provide differing opinions on the tax treatment of virtual currencies, including some that could lead taxpayers to believe that transacting in virtual currencies relieves them of their responsibilities to report and pay taxes. For example, after the Danish tax authorities ruled that profits from casual bitcoin trading are not subject to tax, but taxpayers who trade in bitcoins in the ordinary course of business are subject to the general tax rules, one popular website posted the following statement: “Trading Bitcoins in Denmark is exempt from taxes in Denmark. “Skatterådet”, the Danish commission for taxes, decided that virtual currencies are not “real” money, so they will not charge taxes.”
In some countries, tax authorities produced statements about the tax treatment of Bitcoin. These notable exceptions include, inter alia, the Australian Taxation Office (ATO), the US Internal Revenue Service (IRS), the Norwegian Directorate of Taxation (Skatteetaten), the UK HM Revenue and Customs, the Estonian Tax and Customs Board (Maksu- ja Tolliamet) and the Inland Revenue Authority of Singapore (IRAS) [and the Spanish tax authorities].
However, the provision of guidance is not always desirable. This is especially the case if two different regulatory bodies issue two different opinions on the same matter. Finland provides an excellent example of that situation. In August 2013, the Finnish Tax Authority (Vero Skatt) issued guidance on the tax treatment of Bitcoin for income tax purposes. In its view, virtual currency should not be regarded as currency, security or any other financial product. One year later, the Finnish Central Tax Board published a ruling on the VAT treatment of Bitcoin at the request of an individual taxpayer. The Finnish Central Tax Board ruled that bitcoins are considered currency for VAT purposes and the services provided by the applicant constitute VAT exempt financial services. The ruling does not explain why the Finnish Central Tax Board deviated from the guidance issued by the Finnish Tax Authority. Neither does it provide any explanations on the reasoning behind the decision.
This article has been previously posted by the author un 11 Fen 2015
The information and views set out in this post are those of the author and do not necessarily reflect the official opinion of Law Bitcoin.