VAT treatment of mining and transmission of Bitcoins
Binding tax ruling V3625-16, issued by the Spanish General Tax Directorate of August 31, 2016.
The Inquirer in a company dedicated to the mine and the transmission of Bitcoins and needs to know if both activities are subject to VAT as well as if the Company is entitled to deduct the VAT paid in the acquisition of goods and services in connection with the activity of the Company.
Firstly, we will try to explain what the mining of Bitcoins operations are. These operations are those that allow to create new blocks of Bitcoins which create new Bitcoins that are paid by the system with a commission consisting in an amount of Bitcoins.
To analyse this activity, this body has been based on the criteria maintained by the European Court of Justice on the matter, Tolsma, concluding that this mining activity does not lead to a situation in which there is a relationship between the service provider and the recipient of the same and where the remuneration paid to the provider of the service is the value of the service provided so that mining activity cannot identify is a recipient or client thereof, to the extent that the new Bitcoins are automatically generated by the network.
Therefore, due to the lack of a direct link between the service provided and the consideration received in the designated terms, mining of Bitcoins services shall not be subject to VAT.
On the other hand, with respect to the VAT treatment of the transmission of Bitcoins, this transaction already has been analysed previously by this body, deciding that it is subject but exempt from VAT pursuant to article 20.Uno.18º of the Spanish VAT Law.
As regards the possibility for the Company of deducting VAT, since the transactions carried out carried out by the company are not subject to VAT (mining of Bitcoins) either are VAT exempt but (sale of Bitcoins), they will not entitle the Company to deduct its input VAT paid.