Dispute over Swedish cryptocurrency trader leads to European high court.
The EU is pondering a value-added tax exemption for cryptocurrencies after a question arose between the Swedish taxman and a Swede trading in Bitcoin.
Debate was prompted on the matter after Skatteverket asked the European Court of Justice (ECJ) to evaluate the buying and selling of cryptocurrency as a service that could be exempt from tax.
The agency approached the court after bitcoin forum moderator David Hedqvist asked for a legal decision on the matter prior to selling the currency.
Filings submitted to the court by Juliane Kokott, German advocate general to the European Court of Justice, noted that the EU ruled in a First National Bank of Chicago case that currency traders could be taxed for converting money but not for transferring it.
The decision the court has to make is therefore whether Bitcoin can be considered a form of legal tender that has no other use but for payment.
If the ECJ agrees cryptocurrency will have to "be treated equally under the principle of fiscal neutrality", according to Kokott, with the transfer of currency and cash not being seen as a "taxable event".
"The purpose of the exemption for the transactions with cash and cash equivalents is, in my opinion, designed not to hinder the convertibility of pure cash by charging value added tax," she said.
Her view comes despite ongoing fears from Germany around "the lack of stability and the susceptibility to fraud of Bitcoins", concerns that have been common around the world as cryptocurrencies have become more mainstream.
"Such considerations have their place only within the framework of state supervision over the financial markets," Kokott said.
"The case law makes it clear that even if a behaviour according to the regulatory law is prohibited, this does not affect its value added tax assessment."