Ministry of Finance Germany has recently revealed in a guidance published on Tuesday that Bitcoin users won’t be taxed for using Bitcoins as a mode of payment. This sets apart Germany from U.S whose Internal Revenue Service levies tax on Bitcoin dealings. As a matter of fact, if an American buys cappuccino and pays using Bitcoins, then this shall attract levy of capital gain tax for being considered as a sale of property. As per the new document, Germany will impart a legal status to Bitcoin which is similar to the ones extended to fiat currencies.

The guidance of Bundesministerium der Finanzen is based on a ruling published by European Union Court of Justice in 2015 in regards to value added tax (VAT). The court ruling serves as an example for the European Union nations in taxing Bitcoin while exempting certain transaction types from the taxation radar. The new German document which regarded cryptocurrencies as a legal payment method while justifying its tax decision revealed that:

“Virtual currencies (cryptocurrencies, e.g., Bitcoin) become the equivalent to legal means of payment, insofar as these so-called virtual currencies of those involved in the transaction as an alternative contractual and immediate means of payment have been accepted.”

Conversion of fiat currency into Bitcoin or vice versa is treated as “a taxable miscellaneous benefit.” An article of the EU’s VAT Directive shall be applied on Bitcoin’s price whenever a buyer decides to transact via the cryptocurrency mode. According to the EU ruling, the conversation process from cryptocurrency to fiat or vice versa shall be classified under the head “supply of services,” thus buffering the party acting as an intermediary from getting taxed.

Also Read: Japanese Cryptocurrency Investors To Pay Tax Between 15- 55% On Profits

According to the document, payment made to providers of digital wallet and similar services in the form of fees shall also be taxed. Tax shall not be levied on the other aspects of cryptocurrency ecosystem whatsoever. For example miners receiving block rewards won’t be taxed since their services are deemed to be of voluntary nature according to the document. A tax exemption can also be availed by exchange operators wishing to transact in Bitcoin in their own name as an intermediary. However, no such exemption will be provided to exchanges operating as a technical marketplace.

Here is the official document released:

Documents Credits:- Coindesk

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Rohit Kukreja

Rohit Kukreja is a Commerce graduate with Financial Markets expertise involving Stocks, Forex, Futures & Options Market and now Bitcoins & Cryptocurrency Markets. Blockchain Enthusiast but not a techie, Rohit is an active member of various Blockchain & Crypto communities all over India.