Finnish regulators have classified bitcoin as a financial service, thus granting it VAT-exempt status.
The Finnish Central Board of Taxes (CBT) judged bitcoin to be a financial service in ruling 034/2014, which states that bitcoin purchases qualify as “banking services” under the EU Value Added Tax (VAT) Directive.
The ruling was issued after a court classified bitcoin as a payment instrument and sets Finland’s approach to the cryptocurrency apart from most European jurisdictions, which generally treat bitcoin as a commodity.
What does this mean for Finland?
“By making bitcoins a recognized payment instrument, Finland has pushed it towards being regarded as a formal currency," said Asquith.
He warned, however, that the decision, in the absence of EU-wide regulations, could cause more regulatory problems:
Lack of clear EU framework
While not following the general European Union path on this matter, the Finnish ruling does cite the EU VAT Directive. This seeming contradiction is down to the fact that the EU does not have a joint digital currency framework and therefore existing legislation is open to interpretation by individual nations.
Different European countries have taken a variety of approaches to bitcoin taxation and the application of VAT rules. While some seek to apply VAT to all digital currency sales, others simply ignore them, leaving them unregulated in terms of taxation, or apply capital gains or corporate tax on trading or mining profits.
The EU has been looking into digital currencies for some time, but apart from several consumer warnings and opinions, its response has been slow and there is still no push for legislative uniformity across the region.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.