Business Insider reported the European Court of Justice (ECJ) could decide that purchases made at bitcoin exchanges are VAT-exempt, which means Europeans can go on their merry way buying cryptocurrency without paying tax.
The court, however, could go the other way: it could say that tax should apply to the purchase. Worse, the court could decide the bitcoin itself should be subjected to tax, according to the news outlet.
The upcoming ruling stemmed from a dispute between David Hedqvist and the Swedish tax authorities.
Hedqvist, a bitcoin web forum moderator, wanted to start offering Swedish bitcoin exchange service on his website, according to Reuters. However, Hedqvist and the Swedish government couldn’t agree on whether the exchange service can be exempted from VAT, prompting government officials to seek ECJ’s help.
Tax lawyer Roger van de Berg told Business Insider the high court’s decision will have a far-reaching impact, affecting not only the customers but also the European bitcoin businesses.
If the high court decides that VAT applies to bitcoin, “customers will face additional charges since VAT is added to purchases, making it more expensive to buy/acquire bitcoin,” Van de Berg explained, according to the report.
This, in turn, will push customers to look for options outside of Europe.
“If these services are treated taxable, customers will less likely buy or trade with bitcoin due to higher prices,” the lawyer told the news outlet. “Also, European exchange services will be less attractive for consumers, who will likely buy their bitcoins in third countries where no VAT is due.”
A non-VAT ruling, on the other hand, could boost the cryptocurrency industry in Europe. Van de Berg noted that a “recognition of bitcoin as a ‘pure payment method’ by the highest European Court would in my view also lead to a more positive view on bitcoin in the market.”