VAT on transactions exchanging cryptocurrencies for traditional currencies and vice versa (comment on CJEU judgment 1)

Hot on the heels of my analysis of the Advocate General's opinion, the Court of Justice of the European Union gave its ruling yesterday.

It is noteworthy that the dispositive part of the judgment speaks solely of "the ‘bitcoin’ virtual currency" rather than using a more general expression like "a pure means of payment." So the question I raised with the AG's opinion would not arise under the judgment. It is a judgment specifically on bitcoin, though it does not mean that the possibility of a mutatis mutandis application of it to other cryptocurrencies is foreclosed.

So far as bitcoin is concerned, the Court embraced the opinion of AG. But there are some differences in their reasoning. Thus, AG noted that the Court had not previously ruled on the rationale of the exemption for currency and considered that its purpose is to ensure that, in the interests of the smooth flow of payments, the conversion of currencies is as unencumbered as possible. The Court, on the other hand, considered that the exemption is intended to alleviate the difficulties connected with determining the taxable amount and the amount of VAT deductible which arises in the context of financial transactions. The reasoning of AG seemed informed by a broad policy consideration while that of the Court is based on a technical consideration which is specific to the context of VAT. In the final analysis, neither AG and Court saw good reasons to differentiate bitcoin from traditional currencies with respect to the rationale to which each of them attributed the exemption.