Bitcoin now 'unit of account' in Germany | Hacker News Reader

Bitcoin now 'unit of account' in Germany

theguardian.com

Germany is acting very logically in response to Bitcoin. Their thinking: "if a growing number of people are using it as a store of value or medium of exchange, or as a vehicle for financial speculation, let's regulate and tax its use."

This bodes well for Bitcoin, because other countries are likely to follow Germany's example.

at least within the EU anyway.

> However, companies wanting to use it for commercial transactions would need permission from the Federal Financial Supervision Authority.

That's not a good thing for bitcoin, though, or for the free market in general. One of the main ideas behind bitcoin is its ease of use compared to exisiting methods. The more regulations and limitations imposed on it, the more it becomes like everything else, in terms of ease of use.

With the exception that it's supply and exchange rate cannot be (easily) manipulated by governments, which removes a significant power that they currently exercise over fiat currencies.

The exchange rate can be manipulated by governments just as easily as conventional currencies. The government (or central bank) just needs to engage in open-market transactions using its large reserves of fiat and/or bitcoin.

For example, the Bank of Japan could lower the value of the yen against the bitcoin by purchasing large amounts of bitcoin using yen on the open market.

It would be a bad thing if Bitcoin could be controlled that way. Luckily, the government cannot influence bitcoin transactions.

There is no need to influence transactions technically, it's just clarifying existing law - when doing/receiving Bitcoin transactions, you follow the same rules [or else].

No matter if your income is in Euro, Yen, gold, goats, casino chips, redeemable in-game credits, gems, Bitcoin or anything that may ever be invented - that income is taxable.

If you are offering to hold deposits of value for public, or value transfers to third parties - no matter if that is in Euro, Yen, gold, goats, casino chips, redeemable in-game credits, gems, Bitcoin - you need to follow the financial service regulations.

The only way to avoid that is if (while) your "new money" is useless as money, i.e., you can't buy stuff with it.

Of course they can't, but they can regulate its use and acceptance in their country. Eg. more paperwork/licenses required to accept them, a more difficult taxation process, etc.

Bitcoin fulfils easily the definition of "electronic money" found in the European directive 2009/110/EC, art. 2 def. 1:

> 2. "electronic money" means electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions as defined in point 5 of Article 4 of Directive 2007/64/EC, and which is accepted by a natural or legal person other than the electronic money issuer;

Germany is doing nothing strange, all the EU state will have to do similar things in the future. Bitcoin may be a distributed currency without a politically backed central bank, but it is still a currency, so it is treated as such by any competent tax office.

I don't see that it represents a "claim on the issuer" though. Although you could claim it as issued by the entropy of the universe in a double entry system...

issuer = miner

You bitcoins are accepted because they are recognized by others to be part of a block originally mined by someone.

Really not that different from how money is "printed" by central banks these days (somebody presses the "generate €1.000.000" key and that updates a value in a DB).

Its not a liability of the miner though. I agree it is not much different from money printing, but there is still a balancing entry, so money is a liability of the central bank, although that is meaningless.

that seems weird that germany has to recognize bitcoin as a unit of account to collect taxes on it. surely, if you buy something and then later sell it in the future for a profit you are liable for capital gains on it. surely there is not some massive whitelist of all the goods that attract capital gains tax.

There are extra taxes for trading with currencies in Germany (and other countries, it seems; google "forex tax"). So without it being recognized as a currency, you still have to pay VAT, but not forex tax.

VAT is never charged on assets (which Bitcoin is), only goods and services.

That's the whole point, bitcoin not being treated as a good you trade.

Here in the UK Bitcoins are treated as an electronic service. This means once you're registered for VAT (and you must past ~£70k revenue) you have to charge VAT on sales to:

- Anyone in the UK

- Individuals in the EU

And:

- Reverse charge VAT to business in the EU

Having to charge VAT on Bitcoins is a show stopper if you're intending to sell them unless you close your doors to EU customers.

Bitcoins need to be classed as VAT exempt, or small business in the UK trying to get into Bitcoin will always struggle to grow.

No they are not.

There is no official stance on bitcoin by the UK government, or tax authorities. VAT is not chargeable on bitcoin transactions. There was one gy who was advised by his accontants that he should be charging VAT but that was not a legal requirement, more his accoutnants taking a very risk averse position, that way if VAT was ever brought in on bitcoin he would not get an unexpected VAT bill.

There are There are also some goods and services that are 2 types of 'exemption' to VAT:

* exempt - so no VAT is charged on them

* outside the scope of the UK VAT system altogether

Bitcoin is outside the scope of VAT entirely and it would require the tax man/govt making a declaration on bitcoin as to how it is treated under VAT rules. This has not happened, therefore VAT is not applicable to bitcoin.

I see you deleted your reply, I hope that does not prevent you from seeign that i did reply to it.

That's not really true. VAT is no longer charged on gold coins for investment purposes since the EU made the UK change the law but it is not that clearcut.

The way I understand it, this allows people/companies to do their accounting at least in parts in Bitcoin and then pay taxes (in Euros, of course) on the resulting revenue, rather than treating Bitcoins as goods that are sold/bought for ‘real’ money.

But I am neither an accountant, nor a lawyer, nor an economist, so the likelihood of my guess being correct is rather slim.

not necessarily. If i buy a collectable trading card or spiderman comic and keep it for 3 years then decide to sell it, it usually will not attract capital gains tax. I am not equating bitcoin to collectables but the precedent is there. Additionally they (German govt/tax authorities) recently advised that you would be liable for capital gains tax on bitcoin profits if you held the bitcoins for less than 12 months, held for over 12 months and you do not have to pay tax on any gains. This appears to be in line with that earlier announcement.

I wonder how Germany expects to be able to tax this? It's very hard to audit someone's collection of BTC wallets. Will this only be to require companies to collect VAT for BTC transactions, or will it also include, say, income tax when you're being paid in BTC?

I don't really see why it would be any different from taxing a cash currency?

its actually easier! there's no block chain for paper money

A company pays for work done in BTC. They want to put that into their books as an expense to reduce their tax burden. The other party that did the work is now on record and can be taxed also.

And it is taxed even if it's off record; not declaring the income and successfully keeping it off record doesn't mean "not taxable", it means "tax fraud".

If you manage to hide that income for some time but it comes to light a few years later - BAM, you owe the back taxes in triple+interest.

It is harder to audit paper money, but they are able to tax that...

Of course you have (and already had, always) to pay income tax when being paid in BTC! The "money" definition doesn't matter for that, if you've been paid in any other nonmonatery goods or benefits, it's always been taxable.

Taxing that works - if the volume is sufficient to arise suspicion, then seize the relevant documents and computers, find evidence and charge you for tax fraud.

It sounds more like a psychological achievement than legal. German government has no means to control BTC, that means BTC is still in the wild.

This is good for the moment, but also begs a question: when the real regulation comes into play how it will be played? But for now - relax and enjoy!

No means to control Bitcoin? As long as the German government is able to enforce its tax code it can control Bitcoin. Governments have been collecting taxes on things that are much harder to track than Bitcoin for much longer than Bitcoin has existed.

No way for now, still not clear how they gonna assign monetary value to BTC, what exchange rate they will use?

What exchange rate do they use for forex transactions?

Come on - that's not an obstacle. First, it's YOUR duty to report the income and the appropriate local currency value of that income, so picking a rate is your problem, not theirs.

And then, if they don't like your choice rate, then they pick a rate themselves, tax you on that, and fine you for misrepresenting your income.

Afterwards you (and everyone else) begs them to publish some guidelines on what rate should be used, they do so, and everyone is [mostly] happy.

So Bitcoins aren't a get-out-of-taxes-free card. Isn't that it's primary practical draw? What volume of Bitcoin transactions involve black-market activity?

Bitcoin have different facets. For people leaving in places with a variety of banking choice, some of them may come unnoticed.

Bitcoin is great when:

1. You want to accept or make payments from a country where CC fraud is high or banking is rare/expensive.

2. You worry about high inflation rates in your home currency, and your government creates a lot of obstacles to move your money to other currencies (like today in Argentina).

3. Or you want transact in a grey market tax-free. E.g. a guy selling his IT consulting services.

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