LONDON - British tax authorities said on Monday that they would not impose a tax on trading of the virtual currency Bitcoin.
The announcement came just days after a Bitcoin exchange, Mt. Gox, filed for bankruptcy protection in Tokyo.
HM Revenue and Customs, the British tax agency, said on Monday that it would not charge a 20 percent tax, known as a value added tax, or VAT, on trades of the virtual currency. But, it added, taxes still must be collected on any purchases made using Bitcoin.
“In all instances, VAT will be due in the normal way from suppliers of any goods or services sold in exchange for Bitcoin or other similar cryptocurrency,†the tax agency said.
VAT is charged on most business transactions in Britain and Europe, whether they are between businesses or companies selling to the public. VAT is similar to sales tax in the United States and is included in the price for products and services sold to the public, such as clothing or other merchandise.
Last year, Britain said it considered Bitcoin a tradable voucher and that VAT could be charged on the value of the currency. Entrepreneurs in Britain had argued that such treatment put them at a disadvantage to other countries.
Bitcoin and other virtual currencies “have a unique identity and cannot therefore be directly compared to any other form of investment activity or payment mechanism,†the tax agency said on Monday.
In December, China barred the nation’s banks from accepting Bitcoin as a currency over concerns about potential money laundering and possible threats to financial stability.
The European Banking Authority has also warned consumers about the potential risks of using Bitcoin and other virtual currencies, including losing money in the collapse of a Bitcoin exchange like Mt. Gox.
