On 16 July 2015 the opinion of Advocate General Kokott in the first ECJ bitcoin case (David Hedqvist) was published.


In this case it concerned David Hedqvist, who planned operating the Swedish bitcoin exchange service  on his website "bitcoin.se". Through his website ("exchange") it would be possible to exchange bitcoin (a virtual currency) into Swedish Krona (in the Bitcoin world also known as "fiat" - a currency which derives its value from government regulation or law) and vice versa. The website operates a bid price and offer price, the difference constituting the remuneration for the services bitcoin.se.

David Hedqvist and the Swedish Tax Authorities were in dispute whether or not the exchange of bitcoin into fiat and vice versa should be considered as a VAT taxable or VAT exempt activity. In this regard the Swedish court referred two preliminary question to the ECJ on 2 June 2014:

  1. whether or not a service for remuneration rendered by a bitcoin (virtual currency) exchange can be treated as a VAT relevant service; and
  2. in case the bitcoin (virtual currency) exchange service is VAT relevant, whether a VAT exemption can be applied.

Opinion Advocate General

In the conclusion of Advocate General Kokott ("AG") the two preliminary questions were discussed.

Re. the first preliminary question - can the exchange service fall inside the scope of VAT

Based on established case-law, the AG concludes that the exchange of bitcoin into fiat and vice versa by Hedvqist, should from a VAT perspective be treated similar to foreign exchange transactions. This is because, according to the AG, bitcoin can be treated as a "pure payment system" with a similar function to a legal tender, i.e. payments.  Foreign exchange transactions fall within the scope of the EU VAT Directive, and the consideration for the foreign exchange transaction service is considered to be the net amount  of a number of transactions over a period of time. The same should apply to exchange of bitcoin.

Re. the second preliminary question - can a VAT exemption apply on the exchange service?

The AG subsequently reviews whether such bitcoin exchange service should be VAT exempt. The AG discussed the three financial VAT exemptions which are possibly applicable, i.e. the VAT exemption in relation to (1) securities, (2) transactions of currency and (3) transactions concerning deposits.

The AG concludes that the VAT exemption in relation to securities (1) and transactions concerning deposits (3) are not applicable, in the case bitcoin is exchanged into fiat and vice versa.

In relation to the VAT exemption on the transactions of currency, the AG elaborated on the purpose of this VAT exemption, being:

  1. preventing that the conversion of legal tender would be more expensive and unattractive due to VAT;
  2. a wide definition of currency, as all currencies fall under the scope of this exemption, which is necessary to reach the goal of non-VAT taxability on the conversion of currency (legal tender).

Based on the purpose of the VAT exemption, the AG concludes that the exchange of legal tender into pure payment methods (currencies), such as bitcoin (and vice versa), can fall within the scope of the VAT exemption.

Practical measures for bitcoin exchanges

In case you are running a bitcoin exchange established within the EU or outside the EU (having EU customers) you might face difficulties with the VAT treatment of your services. In case you are charging VAT on the fees for your exchange service or a VAT assessment is issued by your local tax authorities it would be advisable to secure your legal position. Note that a VAT exemption in principle also results in a limitation of the input VAT recovery right.

The conclusion of the AG may also impact other "pure payment methods", such as vouchers. Up to now, EU Member States have their own - uncoordinated - approach as to the VAT treatment of bitcoin. This case provides clarity and uniformity on the VAT treatment of bitcoin in the EU. However, many other questions remain unanswered, such as the VAT treatment of mining of bitcoin and other cryptocurrencies.

Thus, we are looking forward to the ECJ decision, based on which case we will further elaborate on the possible practical impact.