Austria Offers ‘Contradictory’ Guidance on Bitcoin’s Financial Status
Joon Ian Wong (@joonian) | Published on July 25, 2014 at 11:11 BST
Two Austrian cabinet ministers have given guidance on bitcoin’s status as a financial instrument and tax treatment by answering parliamentary questions submitted by a member of the legislature.
Perhaps most notably, the federal minister for finance and vice chancellor, Michael Spindelegger, reiterated that bitcoin is not a financial instrument (that is, a tradable asset), echoing the position of the country’s markets regulator, the Financial Market Authority.
The finance minister also gave guidance on how capital gains taxes from bitcoin investments would be applied. Individuals who sell bitcoin holdings within a year of purchasing them would be subject to capital gains tax, but if the digital currency assets are held beyond a year, proceeds from a sale are not subject to CGT.
The finance minister also outlined accounting rules for businesses dealing in bitcoin. Digital currency assets have to be declared as either fixed assets or working capital. Digital currency held for the long term can be depreciated.
Spindelegger classed bitcoin mining as a kind of ‘industrial’ activity, according to a translation by Austrian bitcoin consulting firm Coinfinity. This would make mining profits subject to value-added tax (VAT).
The federal minister for science, research and economy, Reinhold Mitterlehner, also responded to parliamentary questions. Mitterlehner’s ministry holds a broad portfolio and oversees economic policy and technology and innovation, among other areas.
Financial instrument ambiguity
Mitterlehner, however, appeared to contradict the finance minister’s assertion that bitcoin should not be treated as a financial instrument. Mitterlehner made reference to a German policy recognising bitcoin as a ‘unit of account’ and requiring commercial bitcoin transactions to gain permission from the German financial markets regulator.
“The two ministries contradict each other, so there is no [clear] way to interpret [the guidance],” said Peter Šurda, an Austrian economist who studies bitcoin.
Another area of ambiguity centred on bitcoin and VAT. According to Šurda, the statements given by the ministers are vague about how companies dealing bitcoin should have Austria’s VAT of 20% applied to transactions.
He gave the example of a brokerage that charged a commission for exchanging bitcoin. The tax could be applied just to the commissions, or the brokerage could be liable for VAT on the transacted amount, which would be a significantly heavier tax burden. Surda said the ambiguity could pose a risk for operators of bitcoin ATMs, for example.
Coinfinity operates a Lamassu ATM in the city of Graz. However, its founders remain unconcerned about the latest guidance on VAT, noting that an EU-wide standardised treatment of VAT for bitcoin is due in the coming months.
“Operationally, it doesn’t change much. We’re currently charging commission for the ATM, and treating that as subject to VAT,” said Stefan Kliment, a co-founder of Coinfinity.
The written parliamentary questions on bitcoin were submitted by Niko Alm, a member of parliament and liberal NEOS party. Written questions must be answered within two months of being submitted. Alm is also a journalist, and the editor of the Austrian edition of Vice magazine.
An unconventional politician, Alm made international headlines in 2011 when he won the right to use a photo of himself wearing a pasta-strainer as headgear on his driver’s licence. Alm’s rationale was that the strainer qualified as ‘religious headgear’ because he is a committed ‘pastafarian’.
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