According to the Federal Public Service Finance of Belgium, bitcoin transactions are not subjected to value added tax. The statement newly issued from Belgium’s tax agency was disclosed through a local bitcoin exchange company Belgacoin.
The spokesperson of Belgian’s tax agency finally confirmed that the digital currency transactions are exempted from value added tax. Based on Belgium’s VAT code, bitcoins are not considered as legal form of payment. Despite the VAT exemption, the agency said that this might only be temporary as there may be a need for to subject bitcoin trades to VAT collection in the future.
In a statement, Chantaul Pahaul, senior advisor of the Belgian Federal Public Service says that the position of Belgium may change depending on the European Committee.
As the number of individuals and companies using bitcoins increases, matters pertaining to tax get to be highly complicated since there are variations when it comes to the classification of bitcoins.
Digital Currency Classification
The classification of bitcoins still cause disputes among European countries as each country has different classification. For instance, countries like Germany and Estonia categorize bitcoins as unit of account. This means that any transaction would exempt or excuse bitcoin of taxes. On the other hand, the Swedish Central Bank said in a statement last January that they would categorize cryptocurrencies as asset. Sweden treats cryptocurrencies like stamps, arts, etc. They do not categorize cryptocurrencies as a currency so for every transaction, the Swedish government can impose taxes.
On a wider scale, there has been no clear regulations yet especially on the part of the European Union. The European Banking Authority recommended the European Committee to adopt certain guidelines to look over virtual currencies. This is to give assurance considering the fact that the bitcoin platform is not regulated by any group or agency.
Retroactive Tax Will Not Be Applied
To date, bitcoin trading transactions are not subjected to VAT. This is based on country’s tax code falling under Article 44 in which case retroactive tax is unlikely to apply.
VAT is considered to be a consumption tax which is based on the cost of the product less that material cost. If the VAT in Belgium had pushed through, Belgacoin would have to add 21% to the digital currency’ price to cover the tax expense.
United Kingdom’s Position on Vat
With this announcement by the Federal Public Service, the company Belgacoin buying and selling altcoins like peercon, dogecoin and litecoin does not to think about tax. Just last March, United Kingdom also removed bitcoin transactions from value added tax.
At the end of 2013, bitcoins were declared as the same as vouchers which only meant that any trading or other bitcoin transaction is subjected to a 20% value added tax. But with continuous lobbying by bitcoin proponents and the market, the decision was reversed this year and that bitcoins are now considered to be virtual currencies. They are like gold sovereigns. United Kingdom now exempts bitcoin trade from vat liability.