The question about exemption of bitcoin transactions from VAT has finally been solved after three years of silence.

The whole story with bitcoin taxation started in 2013 when software developer from Sweden David Hedqvist addressed the Swedish Tax Agency with one simple question – are bitcoin transactions VAT-free?

The entrepreneur had all rights to require legislation as at that time he was planning to launch a bitcoin exchange. Besides he ran information website and forum And despite the fact that digital currencies were supposed to be regulated, it took almost three years to get an answer.

The inquiry was transferred to the European Court and only on July 16, 2015 the final response came. The legal advisor of the Court stated that digital currencies should be exempted from VAT. Although the Court hasn’t officially confirmed the decision, it’s more than likely that it will follow the advice of its attorney general.

There are few countries that have already developed legislative base for bitcoin but they didn’t come to an agreement on the matter. Australia considers transactions with digital currencies liable to its services tax while Spain, Britain and Belgium make them VAT-free.

After the announcement was made, Hedqvist’s lawyer Fredrik Berndt said with relief: “We’re happy that the advocate general shares our assessment and we hope that the EU court will share it as well.” It should be noted that for all this time Hedqvist’s case had been run by one of the largest Stockholm’s law companies and the expenses were covered by bitcoin firms which envisaged development prospects in case of positive answer.

The decision is extremely important for bitcoin industry. One of its representatives Tim Rehder, CEO of bitcoin marketplace Cubits, expresses general opinion saying that potential exemption bitcoin transactions from VAT “puts all bitcoin businesses onto solid legal grounds and recognizes bitcoin as a legitimate medium of payment”.

Bitcoin has been seeing more regulation recently and it gives evidence that authorities started to treat the currency seriously. It’s not been long since Canadian Senate committee called for the Canada Revenue Agency and Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) “to prepare for the growing use of such virtual currencies”.

It called the government to better explore the vast potential of blockchain and be careful while developing regulations that may restrict and stifle the industry. Moreover, the committee announced plans to educate the public about the tax obligations of digital currencies when received as income, held as an investment, or when used to purchase goods and services.

Rational regulation of bitcoin will only help to increase trust in the currency and exemption from VAT will definitely attract more entrepreneurs in the sphere.

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