Germany may be one of the first countries to give Bitcoin an official legal and tax status but don’t try paying your taxes with it just yet.
The alternative currency – the world’s “first decentralised digital currency” – hit headlines earlier this year when its value spiked during the Cyprus banking crisis. Active users are a tiny fraction of the world’s population but interest is growing, with dedicated investment funds, trading marketplaces, clusters of shops who accept payments and at least one company about to start shipping Bitcoin ATMs.
Most countries still haven’t figured out exactly how to deal with it. In the US, a federal district judge recently ruled that Bitcoin should be considered a form of money – at least when it comes to prosecuting securities fraud. Thailand just banned it. In the UK, officials came together in May to figure out tax concerns and security risks, including whether Bitcoin’s anonymity could further money-laundering.
In Germany, Bitcoin is “private money” – and fully taxable
In 2011, German financial supervisory authority BaFin defined Bitcoin as a financial instrument and “unit of account”, considered in a similar way to foreign currencies. This month, in response to questions from politician Frank Schäffler, Germany’s Federal Ministry of Finance confirmed that status and described Bitcoin for the first time as a kind of “private money” though still not legal tender or even official “e-money”.
Bitcoin gets official tax status, too. Unlike income from stocks and bonds, those who hold Bitcoins for more than a year won’t have to pay Germany’s 25 per cent capital gains tax. According to Die Welt, it’s not clear yet whether traders will have to pay sales tax – it may depend on whether they do so commercially or casually, in the same way only regular sellers on eBay are expected to pay VAT.
While some commentators suggest too much Bitcoin regulation could destroy the project’s value proposition, enthusiasts in Germany welcomed this month’s confirmation. “Germany is, as far as I know, the only country, from a legal and regulatory standpoint, that confirms what Bitcoins actually are,” Radoslav Albrecht, a cofounder of global peer-to-peer lending platform Bitbond, said. “It’s a good thing.”
Fellow Bitcoin user Stanislav Wolf agreed. “Bitcoin should be regulated. It opens doors to companies who can bring a whole new layer of services.”
Image credit: Flickr user Zach Copley
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