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VAT Exemption for Virtual Currency Exchange Services

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The Norwegian Directorate of Taxes has clarified that exchange services for virtual currencies such as Bitcoin may be exempt from value added tax (VAT) under certain conditions.

EU Court Judgement

According to a recent EU Court judgement, if a virtual currency is accepted by the parties in a transaction as an alternative means of payment and has no purpose other than to be used as a means of payment, VAT must not be calculated on the amount paid for the exchange services. This exemption applies regardless of whether the owner of the virtual currency regards it as an investment or not.

Exemption Applies to Other Virtual Currencies

The Directorate assumes that this exemption also applies to other types of virtual currencies if the preconditions are fulfilled. The Ministry of Finance has stated in a ruling dated 6 February 2017 that the EU Court judgement will be used as a basis for deciding similar exemptions in the Norwegian VAT Act.

Mining of Virtual Currency

On the other hand, an enterprise that only sells computing power to others for mining virtual currency is required to calculate VAT. The Directorate has assessed that this service is liable for VAT and is not exempt under Section 3-6 of the Value Added Tax Act.

Initial Coin Offerings (ICOs)

ICO issuers must also consider VAT liability on a case-by-case basis, as each ICO is unique. The Directorate will assess whether there is a supply of goods or services and if so, what has been supplied, including whether it can be considered a financial service.

Previous Statements

The Directorate of Taxes issued a principal statement in 2013 stating that Bitcoin is an asset for tax purposes and general rules apply. In 2017, the Ministry of Finance discussed the EU Court judgement on virtual currencies and their VAT exemption. The Directorate has also answered questions from the Norwegian Parliament regarding virtual currencies.

Conclusion

In conclusion, exchange services for virtual currencies may be exempt from VAT if they are accepted as alternative means of payment with no purpose other than to be used as a means of payment. Mining of virtual currency is subject to VAT, while ICOs require individual assessment of tax and VAT liability.