Spanish Bitcoin Community Celebrates Bitcoin's VAT Exemption

Spain's bitcoin community is celebrating following confirmation that the cryptocurrency is exempt from Value Added Tax (VAT) in the country.

Bitcoin had always been exempt from VAT, but a spokesperson from Spain's tax office, Ministerio de Hacienda, told CoinDesk the decision had been clarified following a question from a bitcoin aficionado.

The confirmation is based on the interpretation of EU VAT Directive 2006/112/CE, which recognises bitcoin as "financial service".

Both bitcoin startups and legal experts in Spain are praising the administration's decision, which provides clarity in an otherwise uncertain regulatory climate.

Pablo Fernández Burgueño, an expert in e-commerce law and the co-founder of Abanlex, said the exemption seemed "logical". He told CoinDesk:

"Bitcoin is mostly being used as a speculative tool, only a minority are using it as a payment form, because of this the tax office would find it impossible to levy VAT for every bitcoin transaction."

Daniel Diez, business development manager at bitcoin-to-cash service Bit2Me, added that bitcoin startups would now be able to plan their financial strategy more effectively. He said:

"It is great news for [bitcoin] companies because previously, the legal uncertainty around the subject was very high and it could lead to financial planning errors. We hope to see institutions giving more positive [bitcoin related] news that facilitates bitcoin's adoption."

With Spanish banks BBVA and Bankinter now investing in bitcoin companies, Alberto Gómez Toribio, CEO and co-founder of Coinffeine, said the country was "one of the best places in the world" for crypto-entrepreneurs.

Like others, he praised the Spanish government's ability to understand the challenges being faced by companies in the bitcoin space.

"The country's public institutions are aware that in order to stimulate the bitcoin sector, flexibility and being open to discussion with experts in the field is important. They [public institutions] are doing a very good job."

Ramifications of the exemption

According to Fernández, startups can now create business plans with more transparency, fully aware of what kind of taxes they are expected to pay, how much profit they can generate and how to trade in bitcoin.

"The government's decision will actively boost the Spanish bitcoin market," he added.

The lawyer also noted other ramifications of the long-awaited confirmation.

As Spanish citizens are subject to Spanish law, those purchasing the digital currency from companies in Poland or Estonia – the latter levies a 20% tax on those trading bitcoins as a service and the former imposed a 23% VAT on bitcoin mining profits – would still be exempt from paying VAT.

"Those who have previously paid VAT for bitcoin purchases can now refer to Hacienda (the Tax Office) to request a refund," Fernández added.

The application of VAT to bitcoin services has proved somewhat of a grey area in the European Union.

Notably, the tax office's definition of bitcoin as a "financial service, linked to payment methods which enable the transfer of money" and the assumption that bitcoin transfers are considered to be "special risk" activities, means that all Spanish companies operating with the digital currency will have to comply with anti-money laundering (AML) rules.

Hat tip: Law and Bitcoin.

Spanish flag image via Shutterstock.