Bitcoin is a crypto-currency, which means that it does not have a tangible form, but only a digital one. It functions in virtual trading, within the world-wide web - a place with no borders. It is used for carrying out electronic transactions – quickly and without the costs of commission. Thanks to the possibility of conducting international transactions without intermediaries, the use of Bitcoins is more convenient and faster than in the case of traditional commercial trading. Transfers are performed without any delay, and they are not connected with any costs of currency translation. Bitcoins are immune to inflation as their amount has been limited a priori: 21 million. Their unit value, however, is subject to major changes. Despite all of this, trading in Bitcoins and other crypto-currencies is characterised by a fast growing trend.
The use of crypto-currencies in business activities also gives birth to tax effects. The currently binding provisions of law do not expressly regulate this issue, therefore it was necessary for the tax authorities to explain the consequences of trading in crypto-currencies.
The Minister of Finance has presented his position on this matter.
Concerning personal income tax, the Minister of Finance has found that the revenues from the sale of a crypto-currency should be grouped with the sources of revenue from property rights, referred to in Art. 10 Sec. 1 Item 7 of the PIT Act. In this situation, the expenses incurred for the acquisition of crypto-currencies will be treated as revenue generating costs, provided that:
• they have actually been incurred,
• there is a causal link between the expense and the revenues,
• the relevant expense is not entered on the negative list,
• the expense in question has been adequately documented.
If the expense incurred for the purchase of a crypto-currency meets the above conditions, it can be regarded as a revenue generating cost.
On the other hand, if the issue of the Bitcoin crypto-currency and trading in it are part of the objects of a business activity, the revenue obtained on this account is considered a source of revenue as referred to in Art. 10 Sec. 1 sec. 3 of the PIT Act, i.e. non-agricultural business activity.
Concerning Corporate Income Tax, the revenues connected with Bitcoins and other cryptocurrencies are considered revenues from basic operational activity. Any expenses connected with the obtaining of, and trading in, crypto-currencies, in the case of legal persons, will be accounted for on the same principles as those applied to natural persons conducting business activity.
The tax authorities, in their interpretations, put special emphasis on the adequate documenting of the costs incurred in connection with trading in Bitcoins; for example, the Head of the Tax Chamber in Katowice, in its interpretation dated 29 July 2015 (IBPB-1-1/4511-107/15/AB) found that evidence only documenting the withdrawal of money from one’s own bank account and its transfer to a crypto-currencies exchange, and the withdrawal from the exchange account and the subsequent transfer to one’s own bank account, should be regarded as insufficient. This can mean, in practice, that even if a taxpayer is in possession of a document which clearly confirms the volume and the price of the crypto-currencies purchases, this information can be considered as insufficient by the tax authorities in order to treat it as a revenue generating cost.
Concerning the taxation for trading in Bitcoins in relation to VAT, the Court of Justice of the European Union stated its position in the judgement dated C-264/14, in the case: Skatteverket vs. David Hedqvist dated 22 October 2015, namely:
“Art. 135 Sec. 1 letter e) of Directive 2006/12 should be interpreted in such a way that rendering services such as in the principal proceedings, consisting in the exchange of traditional currencies into the units of a virtual currency “bitcoin” and back, made upon the payment of the amount respecting the margin arising from the difference between the price at which a given business operator acquires the currencies, and the price at which such business operator resells them to the clients, constitutes transactions exempt from the tax on goods and services (VAT) in the meaning of this provision.”
On the basis of the above provision, the Polish tax authorities have issued several interpretations which content corresponds to the judgment of the Court of Justice of the European Union. For example, in the individual interpretation of tax law no. IPPP3/4512-1005/15-2/RD dated 15 February 2016, the Head of the Tax Chamber in Warsaw has determined that:
“The legal nature of the purchased Bitcoin Units, with the acceptance of the parties to the transaction, as an alternative tender makes it possible to conclude that a virtual currency will be a carrier of monetary value and a tender just like the currencies used as a legal tender.
By the same token, the fact of purchasing Bitcoin Units from an entity which is a VAT taxpayer, or of Value Added Tax with their principal place of business activity located outside the territory of Poland, and without a permanent place of conducting business activity within Poland, will be an activity subject to taxation on the territory of Poland, in accordance with Art. 28b Sec. 1 of the Act, in conjunction with Art. 17 Sec. 1 item 4 of the Act, as exempt from VAT by virtue of Art. 43 Sec. 1 Item 7 of the Act.”
Consequently, this means that although the sale of Bitcoins is subject to taxation with VAT, it is, however, exempt from this tax under Art. 43 Sec. 1 item 7 of the VAT Act, which means, in practice, that the seller does not impose VAT on the sale of Bitcoins.
The above arguments are also confirmed by the interpretation of the Minister of Finance dated 01.02.2017 no. PT8.8101.20.2016.WCX.63.