Bitcoin should be exempt from VAT - top EU court adviser

COPENHAGEN, July 16 (Reuters) - Digital currencies like bitcoin should be exempt from value-added tax (VAT), the legal adviser to the European Union’s highest court said on Thursday, in a case that could set a rule across the bloc.

Sweden has asked the European Court of Justice to give it guidance on the tax status of bitcoin, to end legal uncertainty over the unit that is not backed or controlled by any government or central bank.

The Luxembourg-based court, set up to make sure EU law is applied equally across member states, is still considering the application but often follows the advice of its advocates-general.

The business of exchanging bitcoin for other currencies counted as a transaction which was exempt from duty under EU VAT regulations, Advocate General Juliane Kokott wrote in her opinion.

Bitcoin-focused businesses welcomed her view, though the court has not said when it will reach a final decision.

“It puts all bitcoin businesses onto solid legal grounds and recognizes bitcoin as a legitimate medium of payment,” Tim Rehder, chief executive of London-based bitcoin marketplace Cubits, told Reuters.

Sweden approached the court after David Hedqvist, a bitcoin web-forum moderator, asked for a ruling on the issue in Sweden because he wanted to start selling the digital currency.

“We’re happy that the advocate general shares our assessment and we hope that the EU court will share it as well,” Hedqvist’s lawyer Fredrik Berndt told Reuters.

A few countries have brought in legislation covering bitcoin, but have taken different approaches.

Australia has said transactions are liable to its goods and services tax, while Britain has made them exempt from VAT. (Reporting By Alexander Tange; Additional reporting by Jemima Kelly in London; Editing by Sabina Zawadzki and Andrew Heavens)