VAT and Bitcoin: Taxation of Mining and Transactions

The Court of Justice of the European Union has ruled that mining operations for Bitcoin will not be subject to Value Added Tax (VAT) as there is no direct relationship between the service provider and the recipient of the service.

The new Bitcoins are automatically generated by the network, and therefore, no actual recipient or customer can be identified.

Additionally, transactions carried out with Bitcoin are exempt from VAT under the terms provided in Article 135(1)(e) of the VAT Directive, as long as the virtual currency is accepted by the parties to a transaction as an alternative means of payment to the legal means of payment and has no purpose other than that of being a means of payment.

Conclusions:

• Cryptocurrency mining operations are exempt for VAT purposes.

• Bitcoins, cryptocurrencies and other digital currencies are currencies and therefore the financial services related to them are exempt from Value Added Tax under the terms established in Article 20.One.18 of Law 37/1992.