The Supreme Administrative Court recently referred a case to the European Court of Justice (ECJ) for a preliminary ruling regarding value added tax (VAT) in respect of Bitcoin.(1) Article 135.1 of the EU Directive on the Common System of Value Added Tax states, among other things, that transactions relating to "currency, bank notes and coins used as legal tender" are exempt from VAT.

A person was about to offer virtual currency exchange services and requested an advance ruling on whether the exchanges would be subject to VAT. The Council of Advance Tax Rulings (a Swedish authority that issues binding advance rulings regarding tax questions) found that such currency exchanges are exempt from VAT. The Swedish Tax Agency appealed the council's decision to the Supreme Administrative Court, which in turn referred the matter to the ECJ for a preliminary ruling.

The ECJ found that virtual currency exchanges shall be considered as services provided for compensation (ie, the margin between the purchase price and the offering price). Further, it found that such transactions are exempt from VAT as a transaction relating to "currency, bank notes and coins used as legal tender".

According to the ECJ, one of the purposes of the exemption is to reduce the difficulties in determining the taxable amount and the deductible VAT in respect of financial transactions. Hence, if the exemption had not applied to the exchange of Bitcoin, it would have contradicted the purposes of the legislation.

For further information on this topic please contact Kine Karlstedt at Advokatfirman Törngren Magnell KB by telephone (+46 8 400 283 00) or email ( Törngren Magnell's website can be accessed at


(1) C- 264/14.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.