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Bitcoins and other virtual currencies in the light of Value Added Tax and Income Tax

Bitcoins and other virtual currencies in the light of Value Added Tax and Income Tax

Value Added Tax (VAT)

Purchase and sale of bitcoins and other virtual currencies against conventional currencies is according to the sale of legal tender currencies VAT free. This is a result of a decision by the European Court of Justice Rs C-264/15 Hedqvist dated 22nd Oct 2015.

Up to now it is not clear whether the exchange of one virtual currency against another virtual curreny is VAT exempt, too. According to the current legal situation within EU, a virtual currency is not a legal tender. Therefore VAT exemption for sales of legal teder currencies does not apply.

Income Tax

Income tax treatment of profits and losses out of virtual currencies in Austria depend on the underlying business model. According to the current legal situation (Basis: 2017) earnings are either:

  • Income out of commercial operations: trade business with virtual currencies; full income tax rate (up to 55% pf profit)
  • Capital gains: virtual currency bears interest/value appreciation; 27,5% special/fixed income tax rate on profit
  • Income out of speculative transactions: private dispatch of virtual currencies:
    • up to one year retention period: full income tax rate reduced by Euro 440 tax allowance
    • more than one year retention period: Income tax free

I am happy to advice you, contact me at otti@tax-austria.at

Disclaimer: author does not hold any liability for completeness or correctness of information on this site. Tax situation has to be evaluated according to the specific single facts. Content of this site is just a schematic representation.

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