Polands Tax Authority says mining profits are subject to whopping 23% VAT

bitcoin mining

Image source: https://www.flickr.com/photos/darus214/

In a recent statement from the Polish Tax Authority, profits from virtual currency mining would be subject to the country’s 23% value-added tax (VAT), creating a huge negative incentive for Poland’s bitcoin miners.

The interpretation came as a response to a question from a bitcoin miner asking for clarification of Polish tax law as it relates to the largely unexplored topic of mining profits.

The applicant claimed that the sale of bitcoin was not subject to the VAT, as those taxes are reserved for commodities and services. Given bitcoin’s unclear categorization, and the international sales of mined bitcoin, the applicant said that bitcoin itself wasn’t subject to the tax because it wasn’t a physical object, and that mining bitcoin did not qualify as a service.

The Tax Authority disagreed, ruling that “in principle” profits from selling “mined cryptocurrency” constitute an activity that would be subject to VAT in Poland, with an imposable rate of 23%.

With most miners already operating at razor-thin profit margins, a 23% tax on profits could effectively end voluntary reporting of bitcoin profits in Poland. The country’s bitcoin community is small, and is seem by many as being somewhat connected to the European black market.

The Polish Tax Authority’s move does little to encourage Polish miners and bitcoiners in general to move into the country’s commercial mainstream.

Written on 27 May 2014.