Thursday, March 1, 2018

Germany bucks trend on Bitcoin taxation as Finance Ministry open to use of the cryptocurrency as a medium of exchange

While economic powers in the East continue to crackdown on cryptocurrencies and the exchanges which facilitate their trading, and the U.S. starts to administer a form of control over their use through the means of taxation, one Western power may soon be implementing a policy which acknowledges cryptocurrencies as a medium of exchange.

In a published guidance out on March 1, the German Finance Ministry appears to be bucking the current trend of treating Bitcoin as a security and instead will allow it to be used as legal tender in the sale and purchase of certain goods and services.

Germany won't tax bitcoin users for using the cryptocurrency as a means of payment, the Ministry of Finance has said. 
The guidance, published Tuesday, sets Germany apart from the U.S., where the Internal Revenue Service treats bitcoin as property for tax purposes - which means that if an American buys a cup of coffee with bitcoin, it's technically considered a sale of property and potentially subject to capital gains tax
Instead, Germany will regard bitcoin as the equivalent to legal tender for tax purposes when used as a means of payment, according to a new document. 
The Bundesministerium der Finanzen based its guidance on a 2015 European Union Court of Justice ruling on value added taxes (VAT). 
The court ruling creates a precedent for European Union nations to tax bitcoin while providing exemptions for certain types of transactions. 
Notably, the new German document justified its tax decisions by regarding cryptocurrencies a legal method for payment, stating: 
"Virtual currencies (cryptocurrencies, e.g., Bitcoin) become the equivalent to legal means of payment, insofar as these so-called virtual currencies of those involved in the transaction as an alternative contractual and immediate means of payment have been accepted." – Coin Desk


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