By SAM SCHECHNER
Europeans: Go buy some bitcoins. They’re tax free.
Virtual currency bitcoin took another step toward legitimacy Thursday, when Europe’s top court ruled that it must be treated like a currency—not a commodity—for tax purposes.
The European Union’s Court of Justice ruled that bitcoin exchanges that transfer conventional currencies such as euros or Swedish krona into bitcoin for a fee are exempt from value-added taxes because of EU rules barring such taxes on transfers of “currency, bank notes and coins used as legal tender.”
The ruling is a significant boost for bitcoin in one of the world’s largest trading areas, removing the threat of taxes that would have raised the cost of buying or using the virtual currency in Europe.
Thursday’s ruling also resolves a dispute within Europe over how to treat the virtual currency. While the UK’s tax authority had taken the position that bitcoin is a currency , tax authorities in some countries, such as Sweden and Germany, had argued that it should be treated more like a commodity, making transfers of it subject to sales taxes.
While the ruling is not a surprise, because it follows a July recommendation from one of the court’s top lawyers, European bitcoin businesses are breathing a sigh of relief. They had argued such taxes would give a competitive advantage to businesses outside the bloc that did not face similar threats.
The ruling is “the first step in securing bitcoin’s future as a genuine alternative to national currencies,” said Richard Asquith, vice president at tax compliance firm Avalara.