It took some time for the Federal Ministry of Finance to turn the ruling of the European Court of Justice into a German fact. But now the time has come. Worries that there will somehow still be some kind of sales control of Bitcoin sales have finally been resolved.
After we had the news about two weeks ago that the Bonn city centre tax office tried to charge a Bitcoin entrepreneur the sales tax for the sale of Bitcoin, this caused a certain horror in the scene. According to unconfirmed reports, this has led to insomnia among bitcoin traders and, in an extreme case, even triggered psychosis. Many a trader began to fear for his economic existence because of the potentially high VAT demands. The unrest was also triggered by reports from tax consultant Rüdiger Quermann and lawyer István Cocron.
Experts such as the tax consultant Christian Densch from Essen, who as a "cryptotaxpert" is the host of a popular Facebook group, have pointed out from the outset that panic is spread unnecessarily here. The demands of the Bonn city centre tax office cannot be held in any way. Nor is it the result of any kind of conspiracy by the tax offices, who are now trying to destroy Bitcoin and ruin the Bitcoin traders, but merely the result of a certain sluggishness on the part of the authorities. It is not necessary to worry, nor is it appropriate to stir up fears or even proclaim the personal Armageddon.
It soon became clear that the tax consultant Christian Densch is right. In a personal conversation and subsequent e-mail traffic, he succeeded in obtaining a published assessment from Dr. Christian Hufen. Dr. Hufen is Personal Advisor to the Parliamentary State Secretary of the Federal Ministry of Finance, Dr. Michael Meister. He writes that Kryptotaxperts has "confirmed" the assumption that the conversion of bitcoins into other currencies is subject to VAT exemption. The decision of the European Court of Justice applies in the Hedqvist case. Accordingly, the exchange of conventional (legal) currencies into units of the virtual currency' Bitcoin' and vice versa is a service for remuneration which falls within the scope of the tax exemption provided for in Article 135 (1)(e) of Council Directive 2006/112/EC of 28 November 2006 (so-called EU VAT Directive, VAT Directive)."
Tax consultant Densch has also asked some further questions - for example about mining or the fiscal handling of payments with Bitcoin - to which the Personal Advisor gives interesting and, in general, pleasant answers. But another time more. It should be noted that the subject of sales tax on the sale of bitcoins was off the table.
A letter from the Federal Ministry of Finance to the supreme fiscal authorities of the federal states dated 27 February, which is published on the Ministry's website, now also confirms to the authorities that the ruling of the ECJ has been applied and confirms the content of the e-mail that "Kryptotaxpert" published on its website on 21 February 2018. The exchange of Bitcoin for Euro is a "taxable other service that is exempt from VAT within the framework of an interpretation of the law in accordance with § 4 No. 8, letter b of the German VAT Act". The principles of this order shall be applied in all open cases. So anyone who still feels threatened by VAT can now officially breathe a sigh of relief.
But why has the Bonn tax office now issued a sales tax assessment in spite of all this? The answer to this question should provide an interesting insight into how German authorities are obliged to work. In a telephone call to Mr. Densch, the Head of Internal Audit and Trade Tax at the Tax Office Bonn Innenstadt pointed out that an ECJ ruling may not be directly implemented by the tax office without a letter of application from the superior authority. Unfortunately, the administrative opinion was still based on the view of the BMF that sales with Bitcoin are subject to VAT. The Bonn city centre tax office therefore had no choice but to issue the unwelcome decision, even though it was clear to itself that this could not be legal.
It would be interesting if the person concerned were to take the floor, given the excitement generated by this subject, it would not have escaped his attention.