Ruling description
In its judgment of December 16, 2015 (case file no. I SA/ Gd 1551/15) the Provincial Administrative Court in Gdańsk found that virtual currencies (bitcoins) are classifiable as property rights for the purpose of identifying sources of revenue subject to personal income tax (PIT) because they are transferable (tradeable) and have a determinable pecuniary value. The revenue from transfers of bitcoins against consideration must therefore be classified as revenue earned from property rights (Article 10(1)(7) in conjunction with Article 18 of the PIT Act), regardless of whether the bitcoins were "mined" or acquired from a third party. The Court concluded that in accordance with Article 22(1) of the PIT Act, the costs of earning revenue from bitcoin transfers against consideration must include all the actually incurred and properly documented costs of acquiring the bitcoins, such as the price paid to purchase them. The costs of earning revenue from property rights may not include the cost of purchasing computers or other equipment as expenditures of this kind are outside the scope of purposes referred to in Article 22(1) of the PIT Act. In the statement of grounds for its judgment, the Court noted that the issue of legal classification of revenue from bitcoin sales had already been considered by the Provincial Administrative Court in Warsaw in its judgment of September 11, 2015 (case file no. III SA/Wa 3374/14) and that it fully agrees with the views expressed by this latter court.
Comment
Bitcoin transactions are increasing in number and it is to be expected that their significance in business dealings will grow as IT technology develops. No separate legislation was promulgated in Poland to regulate the tax consequences of these transactions and the rulings of administrative courts must thus be seen as key in taxation practice. The judgment considered here provides important clues for natural persons concerning the PIT due in connection with bitcoin sale transactions. It is very likely that future judgments issued by administrative courts will reiterate the conclusions arrived at in the judgment of the Provincial Administrative Court in Gdańsk referred to, and the earlier judgment of the Provincial Administrative Court in Warsaw. Entities involved in bitcoin transactions are thus advised to carefully monitor the taxation practice and the relevant court rulings concerning not just income taxes but also VAT and tax on civil law transactions.
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