Do EU VAT Rules affect Bitcoin? Not really

By February 5, 2015Bitcoin Business
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Do EU VAT Rules affect Bitcoin? Not really
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With the new EU VAT legislation, which came into effect on 1 January 2015, the EU companies in the telecommunication, broadcasting or e-service field have to comply with new rules, which require companies selling e-services and goods within the EU to establish a proof of residence for their customers.

EU tax evasion on the microscope

The newly launched VAT regulations focus on the prevention of tax evasion. More specifically, they aim to eliminate the advantage of large corporations to locate their offices in EU countries with low VAT rates in order to supply their products within the EU at the lowest possible taxation. Last December, the European Commission asked all EU members to provide information on existing financial settlements with large multinationals in order to investigate which corporations fall under the 2010-2013 tax ruling, which controls tax evasion. So, the new EU VAT rules are no surprise.

Evidence of location

According to the EU explanatory notes on the EU VAT changes, multinationals both within and outside of the EU need to establish “evidence for the identification of the location of the customer.” In particular, in a summary of nine options, they ask for “bank details such as the location of the bank account used for payment or the billing address of the customer held by that bank;”

Bitcoin not really affected

Some believe that proof of residence could hurt the anonymity of the cryptocurrency. But, in fact, the Bitcoin won’t be affected. If customers want to pay with Bitcoins, they will use their IP address. Under the ruling of Judge Gary Brown of the U.S. District Court for the Eastern District of New York:

“An IP address provides only the location at which one of any number of computer devices may be deployed.”

And he adds that an IP address is not a proof of identity.

On the same page, European Commission spokesperson, Vanessa Mock, told CoinDesk that:

“After a customers’ country of residence has been established, using a potentially anonymous method of payment like Bitcoin shouldn’t pose a problem.”

So, this is good news for the anonymity of Bitcoin.

Images from http://www.freedigitalphotos.net/

Credit: taesmileland

The newly launched VAT regulations focus on the prevention of tax evasion. More specifically, they aim to eliminate […]

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