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Accepting Bitcoin legally
Hello,
According to EU tax authorities, Bitcoin is a product, not a currency.
Accepting it for services means trading service for a product, which is accounted differently.
Did you have to explain your local tax authorities, that you accept and store Bitcoin? Did you have any issues with it?
Comments
If you use Coinbase or Bitpay you will never see the bitcoins, your billing system specifies USD and you receive USD.
Aye, and that's how we do it to stay compliant.
How does the EU treat the trading of goods/services/commodities?
I don't think the EU really treats BTC as a product as it is VAT exempt.
I guess that would vary from a tax office to a tax office. Better be safe than sorry. So far we were unable to secure a binding interpretation for accounting in Bitcoin.
That's just another type of deal. Like changing your service for another service.
Trading BTC is VAT exempt (BTC - EURO exchange, for example). You still need to charge VAT for your service.
I asked an accountant once for a brief opinion on it and he basically said that trading in BTC is VAT exempt, only using fiat currencies like GBP would be taxed VAT. However cashing out any profit made from holding the BTC for a long time would be subject to capital gains tax, he wasn't very clued up though so 0 clue if it was true or not.
That is putting huge doubts on this opinion. I don't believe the relevant legislation mentions currency at all, I'm pretty confident tax would apply as normal when you sell your services, doesn't matter if the invoice was settled via fiat currency or BTC. In regards to VAT applying on purchase and sale of the actual coin, well, I've seen arguments that BTC could be classified as digital goods which is the worrying part, particularly when you sell as that is when you could get liability. I'm unable to get, on paper, an official interpretation that would clarify that, among others. This is why I outsource the trading part to the gateway and get the normal fiat directly to my account from them, to push the liability away.
Capital gains tax seems obvious.
Thanks for sharing
I'm quite certain that BTC is essentially treated as cash for the purpose of trading. So when you sell goods/service in exchange for BTC, VAT is applicable on the sale of that good/service. If you exchange fiat for crypto then that is tax exempt in the same way exchanging GBP for EUR is tax exempt (meaning VAT).
But for good/service, VAT is applicable, and payable in fiat. So in the UK, if you sell something for 100GBP, you're supposed to charge 120GBP. So you're supposed to collect 120GBP worth of crypto, but you still pay 20GBP to HMRC.
If the price of BTC goes down, tough luck, you lose out. For tax purposes, the rate of exchange at the time of the transaction is used. If the price of BTC goes up, when you sell it, you have capital gains to pay. Although capital gains has an annual allowance in most jurisdictions.
For businesses to directly accept crypto and not convert immediately is a bit risky as you accept a huge amount of liability with regards to both VAT and profit tax. And even with the best case scenario, where the value of that crypto goes up, you end up paying even more tax in the form of capital gains, with no relief in the event of the value of the crypto going down.
There is absolutely no regulation that is BTC specific, you might as well be accepting chickens for all the regulatory authorities care, the only difference is that if the chickens (BTC) then become your asset, and that asset increases in value when you sell it you are then responsible for the tax on it.