On 27.02.2018 the German Ministry of Finance issued its very first notification regarding the VAT treatment of Bitcoin. Accordingly, the use of Bitcoin is to be treated the same as traditional currencies. Payments with Bitcoin are therefore not taxable. The exchange of Bitcoin into traditional currencies is tax exempt. However, VAT risks arise for online platforms, which allow virtual currencies to be traded via their platform. The tax exemption does not apply to the services provided by the platform. Additional VAT payments might be due.

According to the Federal Fiscal Court, a fixed interest charge of 6% per annum on tax arrears does not violate the general principle of equal treatment or the prohibition of excessiveness. Following sec 233a and sec 238 German Federal Fiscal Code, interest is due if a tax assessment leads to a subsequent payment in respect of an earlier tax assessment. Nevertheless, there is hope: The decision was applied to income tax in 2013. As VAT is based on European law, different stipulations could be applicable to it.

As from 01.01.2018, the new version of sec 4 no 8 lit. h of the German VAT Act applies to the VAT exemption for the management of investment funds. According to this new legal position, the scope of the VAT exemption is broader than it has previously been. In particular, the management of AIFs could be subject to changes. The precise limits are, however, currently unclear. Investment fund managers should keep an eye on the implications of the broader VAT exemption on their input VAT deduction.