The EU Court of Justice to Decide if Bitcoin Trading to Be Taxed

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Background of financial currency Bitcoin A lot of traders have been profiting from trading Bitcoin with the other traditional currencies as there is a lot of difference in the exchange rate between the digital currency and Fiat currencies of various nations. However, now the profits earned from such transactions may come under taxation. From a notice published Tuesday it appears that the court is going to hear the parties to decide whether exchanging virtual currency like Bitcoin for standard money can be classified as a taxable service. The case came when Sweden’s court referred the question to the EU in June as it was uncertain how to proceed in a case between Swedish tax authorities and David Hedqvist. David Hedqvist is an entrepreneur who operates the website bitcoin.se and wants to sell the virtual currency through it. When his case came to Swedish court it ruled that Bitcoin trades don’t incur value-added taxes; however, this ruling was challenged by the Swedish tax authorities and in consequence now, the ax-free trading of Bitcoin faces a legal test at the EU court. Now, the Swedish court has filed the case wherein it says that the EU Court of Justice must decide if transactions between virtual and traditional currencies can be classed as a service under EU value-added tax rules and if so, whether such trades are tax-exempt. The case is also important for it will give clarity about the status of Bitcoin vis-à-vis taxation. **relatedarticle** Tax Authorities Will Have Clarity about their Power and Authority over Bitcoin Also, the EU court can help tax authorities as once the judgment comes they will know their powers and jurisdiction over Bitcoin as central bankers. They will know whether they have power to regulate supplies of the digital currencies the way do for traditional currencies from the euro to the pound. When no clear answer came from the tax authorities in Sweden, Hedqvist sought a court ruling to clarify how Bitcoin should be taxed. According to him the currency is slowly gaining popularity in Sweden and if the government can ensure greater clarity about the digital currency it can soar. On the other hand, some tax advisers believe that nothing specific is arranged for Bitcoins or virtual currency in EU tax rules that stem from 1993. Particularly, when it comes to Bitcoin which is quite a new concept, there is a lot of scope for redefining some laws which were made when such an innovation did not exist. To contact the reporter of this story: Deepak Tiwari at deepak@forexminute.com