Switzerland Reportedly Eliminates VAT For Bitcoin Transactions

The news was delivered following a formal inquiry to the Swiss Federal Tax Administration (FTA) by three members of Bitcoin Association Switzerland, submitted in Feb 2014. FTA’s answer clarified that bitcoin is not seen as a good or service, and is not subject to VAT.

“This is the most reasonable way to classify Bitcoins in the context of VAT and we are fortunate that the tax administration agrees with our view. Bitcoin is a currency, and thus should also be treated like a currency.”
— – Luzius Meisser, Bitcoin Association Switzerland President

This is great news for Swiss bitcoiners, who actively trade the digital currency, and bitcoin accepting merchants, as they won’t have to pay tax on the service or good and the transaction itself.

“This is excellent news for Bitcoin in Switzerland as it provides the legal certainty we need to professionally operate our business.”
— – Niklas Nikolajsen, Bitcoin Suisse AG CEO

VAT and Bitcoin in Europe

Switzerland joins several other European countries who have clarified their standing on VAT and bitcoin transactions.  The United Kingdom, Germany, France, Belgium, Finland, and most recently, Spain have all classified digital currency transactions as exempt from VAT. A decision by the European Union (EU) could clarify bitcoins VAT standing for all European countries, but  clarification has yet to be provided.

“Treating Bitcoin payments just like any other payment option is a huge milestone for the Swiss Bitcoin economy, and enriches the global digital money ecosystem.”
— – Bernhard Kaufmann, Moving Media GmbH General Manager

It is currently unclear what legislation was cited by the Swiss tax authorities, which are not in the EU jurisdiction. Other European countries who have clarified the matter, and classify digital currencies as VAT exempt, cited EU legislation. "We can conclude from the Granton Advertising judgment, that the concept ‘other negotiable instruments’ under the article 135.1.d) of the Council Directive 2006/112/EC, is closely related to payment instruments, which allows the transfer of money. Consequently, those financial services shall be deemed to be VAT exempt.” stated The General Directorate of Taxes , an dependant on the Spanish taxing authorities.

“Virtual currencies, such as Bitcoin, work as mean of payment and, considering its features, shall be considered under the concept "other negotiable instruments", so its transmission is both liable and exempt from Value Added Tax (VAT)."
— – General Directorate of Taxes

Bitcoin in Switzerland

Switzerland has long been the known as a global financial hub, and recently bitcoin companies have been moving to the country. Bitcoin payment processor and vault service, Xapo, moved to the country for its stable political environment and tradition of financial privacy.

Other companies making the move include the digital currency exchange ShapeShift, who enable the exchange of digital currencies without signing up or storing coins on their website. The startup’s CEO, Eric Voorhees, remarked on Reddit that the company was very happy with the VAT news.

In a recent milestone the a financial marketplace for  digital currencies, Ecurex, came out of stealth mode and announced it has the first Swiss digital finance marketplace to be fully compliant with country’s anti-money laundering legislation. The company was co-founded by Paolo Tasca, a research economist at Deutsche Bundesbank, and plans to offer high-speed trading for fiat and digital currency pairs. The exchange is currently in beta testing, and plans to release products by the end of the year.

“Switzerland probably has the most challenging regulatory environment for such a business and we are thrilled to be the first with a business model that allows us to operate here,” said Tasca in an interview.

“We think a stable regulatory environment is not only beneficial for us in the long term, but also for our customers.”
— – Paolo Tasca, Ecurex Co-Founder