Exclusive interview with David Hedqvist – ECJ proceedings on VAT for Bitcoin



In an exclusive interview with David Hedqvist from Bitcoin.se we see an emerging EU-wide picture for VAT and regulation for Bitcoin. Yesterday David Hedqvist had a preliminary hearing with the ECJ on the application of VAT on Bitcoin and other decentralised digital currencies (DDCs).

The central issues

According to David Hedqvist and official documents filed with the ECJ, There are two parts to the ECJ’s decision. The first is to determine whether or not Article 2(1) VAT Directive can be:

“interpreted as meaning that transactions in the form of what has been designated as the exchange of virtual currency for traditional currency and vice versa, which is effected for consideration added by the supplier when the exchange rates are determined, constitute the supply of a service effected for consideration?”

In other words, is the act of exchanging DDCs for fiat currency a service? If so, this would mean that VAT would be applicable on the commission charged for the service as outlined in Article 78(b). Subsequently, if the service is within this scope of taxation, it has to be decided whether or not the aspect of ‘commission’ would be exempt from VAT under Article 135(1) VAT Directive which is the second central issue being debated.

Opposing views at the Preliminary Hearing

According to David Hedqvist, present at the hearing were himself, EU Commission, Sweden, Estonia and Germany. On the one hand David Hedqvist claimed that VAT should not be applied to the purchase and sale of BTC; this was also supported by the EU Commission. In particular, David Hedqvist claimed that Bitcoin would fall under Article 135(1)(d) whereby:

1  Member States shall exempt the following transactions:

(d) transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments.

According to David Hedqvist, the central point is to determine whether Bitcoin would be considered as ‘other negotiable instruments’.

On the other hand, Sweden, Estonia and Germany claimed that VAT should be applied. In particular, Germany stated that one of the central issues is that of legal tender. In fact, Article 135(1)(e) states that “transactions concerning currency […] used as legal tender” shall be exempt from VAT. Since Bitcoin has no legal tender Germany argued that it does not fall under the scope of currency and thus be exempt from VAT.


David Hedqvist stated that as part of the proceedings, each party involved in the case had 15 minutes to present their arguments. This was followed by a brief set of questions asked by the 5 judge bench including basic questions on how Bitcoin works and its volatility. On the 16th July the General Advocate will present their opinion on the matter.

When asked about the expected outcomes on the case, David Hedqvist said:

“it’s really hard for me to say. I understand both arguments on each side but in my opinion we have a good case”

It is predicated that the proceedings will take several months to conclude. However, the support of the EU Commission on the ‘No-VAT’ stance gives a glimpse of what we might expect in the future from a legislative perspective on an EU level; pending the decision of the ECJ.