Europe's top court has ruled that bitcoin should not be taxed at exchanges.

The ruling comes after a Swedish court referred a case to the European Court of Justice (ECJ).

There had been fears that the court might rule that bitcoin exchanges should have to pay value-added tax (VAT), pushing up the price of bitcoin in Europe.

The court could have even ruled that bitcoin itself should be subject to tax (not just exchanges) — which would have entangled bitcoin businesses in significant new red tape.

But the court ruled that bitcoin exchanges "are exempt from VAT under the provision concerning transactions relating to 'currency, bank notes and coins used as legal tender.''' It's a boost for bitcoin as it attempts to build credibility as a viable alternative currency.

An advocate general — a kind of legal advisor to the ECJ — had said in a legal opinion that bitcoin should not be taxed. It recommended that Europe "keep payments with bitcoin out of scope of VAT as bitcoin can be considered a 'pure payment system,'" tax lawyer Roger van de Berg told Business Insider.

The ECJ had been asked to clarify two questions: First, whether VAT applies to bitcoin; and second, if it does, whether an exemption should exist.

Rogier Fischer, CTO of Dutch bitcoin exchange Litebit.eu, hailed the "huge" news. He told Business Insider that his company has "had to pay 21% over our margins since we started. With the new ruling by the EU court we can lower our margins with 21% and request a refund of paid taxes" — around €15,000.

Here's a link to the full ruling »

And here's a link to the press release »

This story is developing...