Good News: No VAT On Bitcoin In Switzerland

Digital money users do not have to pay value added tax (VAT) on Bitcoin transactions in Switzerland. The Swiss Federal Tax Administration (FTA) has announced there will be no VAT on Bitcoin transactions, according to Bitcoin Association Switzerland.

The Swiss FTA finally made its decision after three Swiss Bitcoin organizations asked for clarification in February 2014. The parties formally requested to straighten out the legality of VAT on Bitcoin transactions. Swiss FTA addressed whether the transfer of Bitcoins constitutes a delivery of goods or services. The government agency decided that transferring Bitcoins represents neither of these. Crypto currency is not seen as a good or a service.

Luzius Meisser, President of Bitcoin Association Switzerland, states: “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. Bitcoin is a currency, and thus should also be treated like a currency.”

Bitcoin payments processed by Swiss financial intermediaries are VAT-exempt

Switzerland treats Bitcoins like any other means of payment. Merchants accepting Bitcoin or financial intermediaries processing Bitcoin payments do not have to charge VAT. Paying for a pizza with Bitcoins, for instance, is not considered a barter trade, and therefore, it cannot trigger double taxation. VAT is applied only on the value of goods and services sold in Switzerland but not on the cost of the payment transaction itself.

“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,” Bernhard Kaufmann, the General Manager of Moving Media GmbH, commented.

Financial services are VAT-exempt in the alpine country, which is essential for financial institutions and payment processors operating in Switzerland. Swiss-based Moving Media is the owner of the Payment21®-brand, and a registered financial intermediary providing AML-compliant digital money transactions. Its Bitcoin Cashier System offers processing services to audited ecommerce platforms and certified e-banking applications around the globe. Payment21’s service offerings have a focus on regulated businesses with a need for effective compliance. The target group includes SWIFT-member banks, publicly listed Internet companies, licensed entertainment groups, and concessionary mobile phone enterprises. 

Exchange fees for converting Bitcoin in legal tender are tax-free  

Trading Bitcoins for Swiss Francs represents an exchange of legal tender against a non-official means of payment, according to Swiss FTA. The trade is no different from exchanging Swiss Francs for Euros. Transaction charges of Bitcoin brokerages are exempt from VAT under article 21 section 2 of the Swiss VAT Act.

Niklas Nikolajsen, CEO of Bitcoin Suisse AG, a Bitcoin brokerage, said: “This is excellent news for Bitcoin in Switzerland as it provides the legal certainty we need to professionally operate our business.” 

Last year Bitcoin Suisse received official approval from Swiss regulators for the operation of a Bitcoin ATM-network with locations in Zurich, St. Gallen, and Lugano. The company is based in Zug operating as a licensed financial intermediary and asset manager.

The Swiss decision gives hope to Bitcoin supporters in Europe and abroad

The news brings hope not only to Bitcoin users in Switzerland, but worldwide. Bitcoin supporters want governments to view Bitcoin as a method of payment, not as a delivery of goods or services subject to a VAT. Bitcoin enthusiasts have noted that it will be difficult for Bitcoin to become a viable complementary currency if cryptographic payment transactions are subject to VAT.

Switzerland joins several other European countries who have clarified their standing on VAT and Bitcoin transactions. The United Kingdom, Germany, France, Belgium, Finland, and most recently, Spain have all classified digital money transactions as exempt from VAT. A decision by the European Union (EU) could clarify bitcoins VAT standing for all European countries, but clarification has yet to be provided. The issue remains pending before the European Court of Justice. It will hold an oral hearing on the case in Luxembourg on June 17, according to Two EU-member states, Germany and Estonia, previously submitted written arguments not in favor of VAT exemption and Germany has indicated that they will participate in the hearing. Switzerland does not belong to the EU.

“We hope that the Swiss decision can serve as an inspiration for Europe,” said Mathieu Buffenoir, Vice President of Bitcoin Association Switzerland, and Manager at Swiss Bitcoin Exchange. SBEX is a regulated crypto-currency broker in the Canton of Neuchâtel with ATMs in Geneva, Lausanne, and Montreux.

Bitcoin Association Switzerland said the decision is only legally binding to the parties that wrote the inquiry. “This decision could also be challenged in court, which no one intends to do”, the association states on its website. Either way, a different answer to others is unlikely thanks to the constitutional principle of equality before the law.

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