On 23 May 2014, two parliamentary questions entitled "Legal clarification on Bitcoin and other virtual currencies" were submitted by Niko Alm, addressed to the Minister of Finance and Economics.
After the Ministry of Economics published answers, there is now also a statement from the Minister of Finance. This response is more comprehensive, but still leaves some questions open. The introduction alone shows that there could still be some divergent findings in the future:
By way of introduction, it is noted that the VAT treatment of Bitcoins is currently a pending issue in the VAT Committee of the European Union. As the result found in the form of guidelines is not yet available, the legal view presented here in this regard could differ from the collective results of all Member States.
Not a financial instrument, but may require a licence
The Minister of Finance does not see Bitcoins as financial instruments and thus shares the current view of the Financial Market Authority. He thus takes a different view than the Minister of Economics, who follows the German financial supervisory authority and rather classifies Bitcoin as a financial instrument.
So although he does not consider Bitcoin a financial instrument, the finance minister does not rule out a concession requirement for certain business models:
[...] the Federal Ministry of Finance does not consider it impossible that there may be business models that trigger a licensing obligation.
VAT on Bitcoin trading
Whether a sale of Bitcoins entails a turnover tax is partially answered:
As Bitcoins are not legal tender, trading them for consideration may be taxableand subject totax.
According to the Minister of Finance, a VAT exemption cannot be applied at the moment, as Bitcoins are not a legal tender claim.
Private sale of Bitcoins tax-free after 1 year
Anyone who holds bitcoins as "economic assets of private property" for longer than one year and then sells them privately does not have to pay "speculation tax" on the profit made:
[...] in the case of the sale of Bitcoins, a speculative transaction pursuant to § 31 EStG 1988 exists if the period between acquisition and sale does not exceed one year.
"Interest-bearing investments" of Bitcoins are taxed as capital income as usual.
Bitcoin mining is a commercial activity and subject to VAT
Unlike the Minister of Economics, the Minister of Finance sees bitcoin mining as a commercial activity:
If bitcoins are created (mining), this is basically a commercial activity that has corresponding tax consequences. The creation of Bitcoins will not be treated differently from the production of other economic goods.
The Minister of Finance does not answer whether the trade regulations apply to the operation of a mining pool, the trading of Bitcoin or the operation of an exchange:
This issue does not fall within the enforcement scope of the Federal Ministry of Finance.
According to the Minister of Finance, bitcoin mining may also constitute a service subject to VAT:
Since in the context of mining the Bitcoin miner performs a service (verification of the disclosed transactions) in order to receive a consideration (Bitcoins or a fraction thereof), taxable supplies may exist if the recipient of the supply is identifiable. In the absence of an applicable exemption provision, these services are subject to VAT. If several miners join together to form a mining pool, this does not change the basic taxability - if the service recipient can be determined - and tax liability of these services. The merger can be qualified as a civil law partnership.
VAT on the operation of Bitcoin vending machines
Anyone who operates a Bitcoin vending machine as a business must collect VAT on these services; the same applies to the operation of an exchange:The services consisting in the operation of a vending machine that exchanges legal tender into virtual currencies that are not legal tender constitute taxable and taxable services [...] if the exchanger is an entrepreneur who carries out this turnover as part of his business. If the services in question are provided by an exchange, the above statements apply mutatis mutandis.
Bitcoins in business assets
Bitcoins held as business assets must be classified as fixed or current assets and may trigger devaluations or write-ups:
If bitcoins are held as business assets [... ], an allocation to fixed or current assets must be made. The documented intention to keep the items in the long term will be decisive for the allocation to fixed assets. Otherwise, they are current assets. Thus, under certain circumstances, the annual valuations may result in tax-effective devaluations but also write-ups. For an entrepreneur who buys the Bitcoins on the "stock exchange" and also exchanges them back into euros there, price gains or losses can arise that have to be taken into account in the context of profit determination.
More questions than answers?
All in all, the collected answers of the two ministers raise many new questions, also because they simply contradict each other on some points.