The European Court of Justice (ECJ) has ruled that Bitcoin transactions are not subject to value-added tax (VAT). The judgment conveyed by the EC stated that “transactions to exchange a traditional currency for the ‘Bitcoin' virtual currency or vice versa” are not subject to VAT.
In Luxembourg, the European Union's highest court settled the matter and stated that virtual currency exchanges would be considered a means of payment and thus excused from VAT.
“It's very good news,” said Simon Dixon, CEO of bnktothefuture.com. “If you were taxed on the exchange it would make it an inferior currency to other currencies, so the implications of it being treated as a currency are that it can free flow.”
The EU court said to omit Bitcoin exchanges from the tax exemptions given to traditional exchanges “would deprive it of part of its effects,” since the aim of the exemption is to oppose “the difficulties connected with determining the taxable amount and the amount of VAT deductible” in cases of taxation of financial transactions.