Can Germany Really Tax Bitcoin?

Can Germany Really Tax Bitcoin?

Germany’s finance ministry recently announced that the country has rethought its position on digital currencies and will, henceforth, recognize bitcoins as “units of account” and start taxing it accordingly as “private money.”

The new classification is an attempt to close up some unofficial bitcoin tax exemptions. It states that purchases are now subject to sales tax and requires users to pay capital gains taxes on their Bitcoin investments. It’s a bold move on the part of the German government—attempting to understand and regulate virtual currencies—but leaves a lot of unanswered questions. For example, how will the new rules be implemented? How will this affect online payment processors? Can’t this all be avoided by simply moving a company’s payment processing out of the country, as companies like Google and Amazon have?

Just days before Germany’s announcement, New York’s Department of Financial Services subpoenaed 22 Bitcoin companies, hoping to learn whether or not they observe financial regulations.

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