Germany: Bitcoin Exempt from VAT Tax when Used as Payment

Mar 4, 2018, 7:43PM
1 min, 19 sec READ

The German government has released guidelines about how it will tax Bitcoin and other cryptocurrencies. Bitcoin will be exempt from VAT tax when used to pay for goods or services. Miners and exchanges will also enjoy tax exemptions.

The German Finance Ministry (Bundesministerium der Finanzen) has outlined new guidelines regarding its tax treatment of Bitcoin and other cryptocurrencies. 

In an official document published Tuesday, Germany exempts Bitcoin from value-added tax (VAT) when it is used as a means of payment for goods or services. These rules may help set a precedent for other nations in the European Union which may soon follow Germany's lead and update their official rules on the taxation status of digital currencies.

Bitcoin: A Unit of Account or a Currency?

The German government does not consider Bitcoin a currency because it is not issued by a central bank. Instead, it classifies cryptocurrencies as "units of account" - units of value that are not considered legal tender as per the German Banking Act. However, under these new guidelines, the country will view Bitcoin as equivalent to legal tender when it is used as a means of payment.

The guidelines also reference two other aspects of the cryptocurrency ecosystem: mining organizations and exchanges. Blockchain miners will not be taxed on their block rewards, and crypto exchanges will earn tax exemptions provided certain criteria are met.

Tax exemptions are nothing new, and Germany isn't the only European Union nation to exempt Bitcoin from VAT taxation. Back in 2016, the Italian government issued guidance on the issue with its Resolution no. 72 stating that Bitcoin transactions should be considered VAT exempt services with, quote "no right of deduction".

 

Disclaimer: information contained herein is provided without considering your personal circumstances, therefore should not be construed as financial advice, investment recommendation or an offer of, or solicitation for, any transactions in cryptocurrencies.