Ruling description

The Court of Justice of the European Unio (CJEU) ruled on October 22, 2015 in case C-264/14 that transactions to exchange bitcoins for traditional currencies, in the meaning of Council Directive 2006/112/EU (the “VAT Directive”), are tantamount to financial services and as such are VAT-exempt.

The judgment came in connection with a case brought by a Swedish national who wished to run a business exchanging bitcoins (a virtual currency which is not issued by any single issuer but created directly online using a special algorithm) via a dedicated website. To this end he applied to the Swedish Revenue Law Commission, the country’s authority responsible for interpreting tax laws, for a ruling on the manner of taxation of the proposed business activity. The Commission found transactions to exchange bitcoins for traditional currencies to be exempt from VAT, but the Swedish Tax Authority appealed against this interpretation to Sweden’s Supreme Administrative Court which in turn requested the CJEU to provide an interpretation of the VAT Directive in the context of the case brought before it.

In its judgment the CJEU held that the sole purpose of bitcoins is, without a doubt, to serve as a means of payment. Consequently, the CJEU found that the service of exchanging traditional currencies for bitcoins (and vice versa) for consideration (the margin here being the difference between the currency’s buying and selling prices) constitutes a financial service subject to the VAT exemption granted under the VAT Directive to transactions involving currencies, banknotes and coins used as legal tender.


The first thing to mention is that some European Union countries recognized the exchange of bitcoins for real money as a service akin to financial services already before the CJEU handed down the judgment considered here. Others, including Poland (but also Germany and Estonia), saw this activity as subject to VAT. The view prevailing in Poland, upheld by the tax authorities and the Ministry of Finance, is that this form of trade is subject to 23% VAT, being a service provided electronically.

The discussed judgment of the CJEU in which bitcoin exchange services were classified as financial services puts the bitcoin on a par with other currencies. One must agree that since bitcoins are in fact used as a means of payment, the transactions to exchange them must be seen as currency transactions and cannot be deemed services subject to VAT in the meaning of the VAT Directive.

In many countries bitcoins remain to be recognized as legal tender accepted on the grounds of these countries’ legal systems, which is a precondition for eligibility to VAT exemption. It appears, however, that the conclusions drawn by the CJEU in its judgment are correct and that transactions involving non-traditional currencies (such as bitcoins) – considered to be legal tender in one or more EU member states – are in fact financial transactions exempt from VAT also in those countries which are yet to unequivocally accept them as legal tender. The approval of the bitcoins’ payment function by the CJEU and acknowledgment of their VAT exemption will no doubt make it easier for business partners to settle their accounts using this currency and help spread the use of bitcoins in the future. That said, a development of this kind may give rise to practical problems which will have to be tackled at some point.