Using cryptocurrency as a mode of payment will be exempted from tax in Germany, the Ministry of Finance has said.
The Ministry issued a guidance regarding this, citing a 2015 European Union Court of Justice ruling on value added taxes (VAT).
The Court ruled that it considers cryptocurrency as the equivalent to legal tender:
“So-called virtual currencies (cryptocurrencies such as Bitcoin) are considered equal to the legal means of payment, as long as these so-called virtual currencies have been accepted as alternative and contractual means of payment by the parties involved in the transaction and have no other purpose than being used as a means of payment.”
The European Court had set the decision as a precedent for all members of the European Union to tax bitcoin while providing exemptions on certain transactions.
The decision sets Germany apart from other European countries and the United States, where Bitcoin is considered as a property for tax.
As per the Guidance, a party acting as an intermediary for converting bitcoin into a fiat currency or vice versa will not be taxed.
Similarly, exchange operators that buy or sell bitcoin in their own name as an intermediary will receive a tax exemption, though an exchange operating as a technical marketplace will not receive any such exemption.