VAT liabilities on mining, exchange and consideration role for cryptocurrencies and similar crypto-assets
Ireland’s tax authorities, the Revenue, has confirmed the VAT and other tax obligations on virtual digital currencies, including Bitcoin and tokens. An EU review on VAT on crypto-assets is underway.
Key points from the Revenue include:
- Mining – the creation of cryptocurrencies or ‘forging’ is exempt from VAT on the basis that there is generally no consideration in play.
- Exchange – in line with the European Court of Justice Heqvist ruling, the exchange of cryptocurrencies for traditional, fiat currencies is an exempt financial services where the company performing the exchange acts as principal (i.e. buys and sells crypto-assets acting as the owner of the virtual asset).
- Supplies of goods or services – VAT is due on transactions for goods or services paid for by crypto-assets. The taxable amount for VAT purposes will be the € value of the cryptocurrencies at the time of the supply.
Types of crypto-assets payment tokens
The Commission views crypto-assets as coming in three forms of tokens:
- Payment tokens, a virtual payment currency such as bitcoin
- Security tokens, investment tradeable assets such as Spice
- Utility tokens, a virtual prepayment for goods or services similar to vouchers
Electronic non-fiat currencies, cryptocurrencies or crypto-assets exist as peer-to-peer payments systems without the support or regulation of state central banks. They generally use linked computers (‘nodes’) as distributed ledger systems (‘blockchain’) to record and provide proof of currency exchanges whilst protecting the identify of individuals.