Well there are already stores that accept Bitcoin as payment. If they aren't hording them, what are they supposed to do with them? Mark them up 2% and sell them back to the public of course. Since there is a generally high general demand for bitcoin right now, this seems like the easiest way to get them into circulation. Most people I talk to want to get one or two to see how it works or whatever. Going through Dwolla and Mt Gox is too much hassle for them. But if they could go to say, that restaurant in New York and buy some of their Bitcoin reserve on the spot, it might be worth while.

This is exactly how a lot of the smaller money transmission companies here operate.  Merchants whose core business is something else entirely offer money transmission services.  They are still required to be licensed in order to do this though, so they operate as agents of a parent company.  They're also required to sight the same ID as larger services like Western Union.

As long as you're taking someone's money in order to transmit it to someone else - even if the means by which the actual transmission happens is through Bitcoins - you're going to need licensing as a deposit-taker/money transmitter/payment processor/whatever.  Being a small corner store offering the service as a sideline isn't going to exempt you from the legal requirements for operating such a service.

And service based taxes are also going to be an issue in some countries. 

But they can't advertise to the government inspectors "bitcoins bought and sold here VAT free" can they?

Nobody's ever suggested that MtGox even tries to comply with financial services laws in the countries in which it operates.  They're operating unlicenced and unregulated and France probably won't be the only country where that bites them on the ass.


And how is the merchant going to deal with this from an accounting point of view?  What's he going to explain the outgoing dollar payments as in the books?  If he keeps the transactions totally off the books then he's in for a world of grief if his activity gets discovered.  Plus he needs a legitimate way of converting the Bitcoins transferred to him back to hard currency because there's only so much you can buy with Bitcoins at this point in time.  He doesn't want to be stuck with Bitcoins he exchanged for $2.50 each when they're now only worth $1.50.

My understanding of a VAT, is that the product is taxed whenever "value" is added in the chain. According to the Wikipedia Article, suppliers are able to deduct the tax they pay on inputs, such that they only pay the government tax on the "value" they add.

This is awkward for bitcoin if it is considered a commodity. That implies that in a country with a 20% VAT, 10 BTC of any 50 BTC coin creation transactions should go to the government as tax. If you buy coins low, and sell them high, you would also pay 20% tax on the profit (if your coin supplier also paid the VAT, 20% on the face value otherwise).

This brings up an awkward situation where it may be considered beneficial to consider bitcoin a currency (and all the expensive regulation that entails) in some countries (like where VAT is a concern), and a commodity in others. If it is a commodity, you you need to secure export and import permits to move Bitcoins across borders?

Edit: I also did not mention that informal transactions totalling less than ~$35 thousand a year are often exempt. As BTC prices rise, more and more miners (and informal traders) may flirt with the threshold.

Much better explained than I could do: https://en.wikipedia.org/wiki/VAT


No. Currency exchange is VAT-exempt.

Yes, that is the real problem with VAT vs bitcoins. In probably 90% of the cases, bitcoins will be purchased from people, and will not carry VAT, so there's nothing to deduct .

I don't know what is the procedure for VAT in Japan, but as the general case says, they should charge VAT on their exchange fees.


I believe they would have to, yes.

Of course, it's the difference between selling the coins and being an intermediary for two parties who want to exchange coins. See my post #24.

$350 billion this year ... just to developing countries.

http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:23058070~pagePK:64257043~piPK:437376~theSitePK:4607,00.html