Bitcoin and VAT\GST
With a trade price surging and falling throughout the year, Bitcoin, the world’s first digital currency, burst on the scene in 2018, jumping out of the shadows and the into the mainstream consciousness. While the masses remain somewhat puzzled by the new form of currency, the business world is slowly incorporating Bitcoin as a payment system on par with established currencies.
But while all other types of money are connected to banks and financial institutions and regulated by governments, Bitcoin remains an Internet phenomenon, with no regulation and no institutional intermediaries. It relies on a blockchain – an incorruptible shared ledger – to vouch for transactions and ensure order.
For some people, that level of protection is simply not enough. Without enforceable regulation, Bitcoin is just a step too far for them to feel at ease owning and using it. For others, it’s the ultimate fulfillment of the Internet’s potential to change the world and bring about a revolution in the way people use and relate to money. For them, Bitcoin is more than just the currency of the future. It is the ultimate sign of freedom from government control and business interests and heralds a new era in liberty, privacy, and personal accountability.
It is no accident that Bitcoin gained so much attention for its stunning rise in value, which is all about speculation. Speculating on Bitcoin’s future allows people from both sides of the divide to channel their views of the new cryptocurrency. Even those who don’t believe in Bitcoin as a legitimate currency can accept the legitimacy of its trade value. And those who want to see Bitcoin grow and expand can invest directly in the future of the currency by buying Bitcoins and hoping that they go up in value.
VAT\GST Collection in Different Countries
As more people use Bitcoin for actual transactions, governments are starting to demand their fair share of taxes. While it may not be possible for any government to have complete control of the transactions, at least not as the system exists at present, it is possible to establish laws demanding that Bitcoin users pay the same taxes are users of all other forms of currency.
The current slate of laws varies widely from country to country even on which part of the transaction is taxable. The issue in question is whether a government classifies Bitcoin as a currency or as a tradable property. Norway, for example, where Bitcoin is no longer seen as a currency, all Bitcoin transactions are exempt from VAT\GST payment.
In the UK, however, Bitcoin is viewed as a currency and subject to VAT\GST payment. But it is only taxable when Bitcoin is used to make a purchase, not when the coins themselves are acquired. In other words, someone can purchase an amount of Bitcoins and will not be charged VAT\GST for that purchase. But when those Bitcoins themselves are used to make a payment, VAT\GST is added to the total.
In Sweden, using Bitcoins is considered a form of barter. In practice, that means that any trade involving Bitcoins consists of two transactions. The first is the purchase of a product from a business. That is accorded full VAT\GST charges. The second is the purchase of Bitcoins from the individual. That does not require VAT\GST payment because the purchase from an individual is not VAT\GST-eligible.
Learn About VAT\GST Returns in Europe
While not every country in Europe charges VAT\GST on Bitcoin use, it is a matter of time before the digital currency comes under a unified policy. Governments will have to collectively determine what status Bitcoin holds. This is, of course, a challenge because there has never been a fully digital currency in existence before, much less one that is gaining support from major venders.
The growth of Bitcoin also adds another layer of complexity to the VAT\GST system in Europe, where every country has its own policies in regard to VAT\GST returns, including which goods and services are eligible for returns and which are not. The same product or service could be treated differently in a handful of countries.
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