Finland Declares Bitcoin a Financial Service, VAT Exempt

Finland bitcoin taxation
Finland Declares Bitcoin a Financial Service, VAT Exempt
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LONDON (InsideBitcoins) — To those unfamiliar with the concept of European federalism, decisions taken by member states surrounding the status of bitcoin might seem at odds with the concept of a united Europe. Such confusion is often further compounded by the greater sense of integration that one might expect from the Eurozone, that part of Europe that has adopted the Euro as its national currency. Here we might expect a homogeneous response to issues of a fiscal nature; expectation however, is a concept that holds little collateral in Europe.

The European parliament certainly does have the power to impose rules upon member states and whilst many of these rules are laid out in conventions, treaties and the European constitution, the EU’s political machinery is notoriously sluggish when it comes to making decisions based on new developments, such as the entirely unforeseen creation of bitcoin.

Finland joined the EU in 1995 and officially adopted the Euro in 1999; as the most sparsely populated country in Europe it has always adopted a somewhat maverick posture when it comes to European integration and yet its reputation as a manufacturing hub, especially in regards to the electronics industry, has often singled it out as a cornerstone of the EU as a whole. As a highly respected innovator, it is perhaps unsurprising that the onset of bitcoin managed to peak the curiosity of both the Finnish population and its regulatory bodies.

And that curiosity came to a head when, as reported in the International Tax Review, Finland joined the UK in declaring that bitcoin should not be taxed. The Finnish Central Board of Taxation’s decision stated that since commission fees charged on bitcoin purchases are in effect banking services, they fall under the existing EU VAT directive and are therefore VAT exempt.

Much like in the USA, where something is only unconstitutional if the Supreme Court says it is, such rulings are potentially transitory; an EU-wide ruling is still a possibility and as unwelcome to the bitcoin community as it might be, a reversal of member state decisions though  increasingly unlikely, cannot be ruled out.

For now, Finland has joined a growing list of European countries that have decided to adopt a sensible approach to bitcoin. The country has both standard and reduced VAT rates and applying even the reduced rate of 10% to transactions would make the currency untenable; the standard rate of 24% would have officially made it the most expensive way of moving money around — aside from hiring an actual courier.

One thing is however, certain, an EU-wide ruling will be made at some point in the future and a unified position will be adopted. Whether that ruling is going to be good for bitcoin or not, remains a matter of conjecture.

Ian Jackson is an Inside Bitcoins correspondent based in the U.K.

About Ian Jackson

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