What do tax authorities think about Bitcoin?

Although Bitcoin has been with us for some time, there is some uncertainty on the part of the tax authorities about its status and tax treatment. Is it money, a financial instrument or an asset? In most countries there has not yet been a statement in this regard from the authorities.

In the absence of official statements, taxpayers often turn to the Internet to resolve their doubts. This may lead the reader to encounter certain misinformation, whether in blogs, Wikipedia articles or web pages issuing different opinions on the tax treatment of digital currencies, including some that may lead the taxpayer to think that carrying out transactions with virtual currencies can exempt them from their tax responsibilities. For example, after the Danish tax authorities established that profits derived from casual currency exchange are not subject to tax, while those who engage in digital currency exchange in a professional capacity will have to pay taxes, a popular news website published the following: «The exchange of bitcoins in Denmark is exempt from taxation in that country. The Danish tax authorities have decided that digital currencies are not «real» money, so they will not be subject to taxation.»

In some countries, tax authorities have ruled on the tax treatment of digital currencies. These exceptions include, among others, the tax authorities of Australia, the United States, Norway, the United Kingdom, Estonia or Singapore [and Spain].

However, these decisions are not always consistent. Especially in the event that two different regulatory bodies rule on the same issue, issuing different opinions. Finland is a great example of this. In August 2013, the Finnish tax authorities produced guidance on the taxation of income derived from digital currencies. The Finnish tax authorities have established that bitcoins are considered currency for the purposes of Value Added Tax, so they enjoy the exemption applicable to financial services. Their decision does not explain why these authorities have decided to deviate from the aforementioned guide. They also do not explain the reasoning behind this decision.

This article has previously been published by its author on February 11, 2015

The information and points of view expressed in this article belong to its author and do not necessarily reflect the official opinion of Law & Bitcoin.