EU Court of Justice Bitcoin Decision

  1. The Court Decision

The EU Court of Justice yesterday decided that bitcoins are not discriminated against compared to dollars, euros, or yen (Case C‑264/14, Hedquist).

When running a currency exchange selling euros for dollars or yen, there is no need to pay value added tax for the value of the currency under Article 135 (1)  e) of Directive 112/2006. That reads:

transactions, including negotiation, concerning currency, bank notes and coins used as legal tender, with the exception of collectors’ items, that is to say, gold, silver or other metal coins or bank notes which are not normally used as legal tender or coins of numismatic interest;

The Court said in paragraphs 44 to 53 of the judgment that bitcoin falls under this exception. It therefore is a “currency” under this Directive.

2. Discussion

It would be a possible compromise to subject only whatever markup or fee an exchange charges to VAT, but not the value of the bitcoin or other currency involved.

This decision seems to exempt transactions of bitcoin exchanges completely. The exemption is not restricted to the value of the bitcoins but includes also whatever markup or fee is charged.

The decision is only about VAT. It is a different question how capital gains on bitcoin investments are treated. Therefore it would be not exact to state that “bitcoin is exempt from tax in Europe”.

The opinion of Advocate General Kokott published in July in this case comes to the same result. In paragraphs 41 to 44 it discusses the issue of equal treatment under Article 20 of the Charter of Fundamental Rights.

As that opinion says (I agree) there is no substantial difference between trading dollars for euros and trading dollars for bitcoins. It would be discrimination in violation of European Union Fundamental Rights to exempt one case from VAT but not the other.

While it is true that bitcoins are until now not legal tender anywhere, there is no reason that should make a difference in this situation.

This decision may well be seen as recognizing bitcoin as a currency. If so, the Japanese government’s position to the contrary I discussed in my book “Japanese Bitcoin Law“as well as on this blog last year might be in need of reevaluation.

Also, since it is now clear that Europe will not take VAT on bitcoin exchange transactions, every country that decides the other way will find their bitcoin exchanges at a significant competitive disadvantage. If Japan charges 8 percent consumption tax on all such transactions, people would refrain from trading in Japan and use some exchange in Germany or the UK instead.

That in turn would slow down development of bitcoin infrastructure in Japan, leaving the nation with a second class Internet that can’t handle payments efficiently, and with an outdated financial industry that can’t compete internationally.




Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003,

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