By circular of February 27, 2018, the Federal Ministry of Finance has clarified some open VAT-related questions with respect to the trading and mining of cryptocurrencies. According to the circular, transactions in bitcoin are VAT exempt. Accepting bitcoin as consideration is deemed to be equivalent with using a legal tender. The valuation by the service provider is based on the equivalent in the local currency of the member state in which the goods or services are provided at the time when they are provided. The parties can use the rates quoted on the pertinent internet platforms like ariva.de or coinmarketcap.com.
No VAT on solo mining and mining pools
According to the opinion of the Federal Ministry of Finance, mining bitcoins is no service subject to VAT, either. Neither block rewards nor transaction fees are deemed to constitute consideration for mining. This applies to both solo mining and participation in pool mining.
Fees charged by cryptocurrency trading platforms or fees for providing wallets, on the contrary, are basically subject to VAT. In this context, it is important to remember that the place of performance is the client’s domicile. This place may have to be determined in a legally admissible way to ensure your VAT return is correct.
VAT exemption only applies to coins used as means of payment
However, the VAT exemption only applies to bitcoins or other cryptocurrencies that have no other purpose than to be means of payment. If the currency has additional functions (e.g. an entitlement to storage space in a cloud), the exemption from value added tax does not apply. If you wish to engage in trading cryptocurrencies or mining coins as a business, we will be happy to inform you about the VAT consequences arising in the individual case.