Bitcoin and VAT Judgment

October 22, 2015

The VAT Directive provides that the supply of goods and services for consideration within the territory of a Member State by a taxable person acting as such is to be subject to VAT. However, Member States must exempt, inter alia, transactions relating to ‘currency, bank notes and coins used as legal tender’. So the question for the Court of Justice of the European Union in Case C-264/14 Skatteverket v David Hedqvist was whether this exemption applied to bitcoin purchases.


Mr David Hedqvist, a Swedish national, aims to provide services consisting of the exchange of traditional currency for the ‘bitcoin’ virtual currency and vice versa. Before starting to effect such transactions, Mr Hedqvist requested a preliminary decision from the Swedish Revenue Law Commission in order to establish whether VAT must be paid on the purchase and sale of ‘bitcoin’ virtual currency units. According to that commission, ‘bitcoin’ is a means of payment used in a similar way to legal means of payment and the transactions that Mr Hedqvist intends to effect must, consequently, be exempt from VAT.

The Skatteverket, the Swedish Tax Authority, appealed against the Revenue Law Commission’s decision to the Högsta förvaltningsdomstolen (Supreme Administrative Court, Sweden). It submits that the transactions that Mr Hedqvist intends to effect are not covered by the exemptions provided for in the VAT Directive. In those circumstances, the Högsta förvaltningsdomstolen asked the Court of Justice whether such transactions are subject to VAT and, if so, whether they are exempt from that tax.


The CJEU has held that transactions to exchange traditional currencies for units of the ‘bitcoin’ virtual currency (and vice versa) constitute the supply of services for consideration within the meaning of the directive, since they consist of the exchange of different means of payment and there is a direct link between the service provided by Mr Hedqvist and the consideration received by him, namely the margin created by the difference between, on the one hand, the price at which he purchases currencies and, on the other hand, the price at which he sells them to his clients.  The Court also held that those transactions are exempt from VAT under the provision concerning transactions relating to ‘currency, bank notes and coins used as legal tender’. To exclude transactions such as those envisaged by Mr Hedqvist from the scope of that provision would deprive it of part of its effects having regard to the aim of the exemption, which is to alleviate the difficulties connected with determining the taxable amount and the amount of VAT deductible which arise in the context of the taxation of financial transactions.

The judgment can be read in full here.