Preliminary questions to the Supreme Court on deduction of input tax in case of difficulties relating to | Deloitte Nederland


Preliminary questions to the Supreme Court on deduction of input tax in case of difficulties relating to evidence

On 15 July 2020, The Hague Court of Appeal referred preliminary questions to the Supreme Court on the use of presumptions or general statistical data to support the claim that the customers of interested party, involved in the mining of bitcoins, are located outside the EU.

21 September 2020


The interested party is involved in the mining of bitcoins and achieves this by providing the required computer power. In this context, input tax has been charged on the purchase of, among other things, computer and cooling equipment. The interested party deducted this input tax. However, the deduction was refused by the tax authorities.

In the first place, it is necessary to determine whether the mining activities are transactions subject to VAT. If this is the case, no dispute exists between parties that it is a VAT exempt (financial) activity, for which a right to deduct input tax exists if the customers are established outside the EU.

In this context, the interested party has argued that the trade in bitcoins takes place mainly (98%) outside the EU and on this basis it is assumed that its customers are therefore also non-EU parties, with the result that 98% of the input tax can be deducted. It is therefore questionable whether it has been demonstrated sufficiently that and to what extent customers are located outside the EU.

Court ruling

In this case the Court rules that the mining activities of the interested party are VAT relevant services. As a result, no dispute exists between parties that the mining activities are VAT exempt financial services. The consequence that there is a VAT exempt financial service is that the input tax on costs is deductible to the extent that these costs are attributable to services supplied to customers outside the EU. In such cases, the burden of proof lies with the taxable person. In this particular case, however, problems in relation to the burden of proof exist. Providing concrete proof of the location of the buyers of the mining activities is not possible because of the anonymous nature of bitcoins and the blockchain.

The Court finds that, normally, general statistics are not sufficient to satisfy the burden of proof that rests with the taxable person. However, the Court also states that different rules of evidence apply to different services.

In this context, the Court refers first to the rules of evidence relating to the place of supply of telecommunications, broadcasting and electronically supplied services. In the regulation to determine the place of supply of these services, the evidence that the place of service is situated where the customer is established is used. If it cannot (with certainty) be determined in practice, the service provider may have to determine the place of establishment of the customer on the basis of two items of non-contradictory evidence.

Secondly, the Court refers to a decree on the right to deduct relating to travel agents. In addition to VAT taxable services they also provide VAT exempt services relating to the taking out of travel and cancellation insurance policies. The decree approves the use of data (provided by the Dutch Association of Travel Agents and Tour Operators) as the basis for calculating the ratio between VAT taxable and VAT exempt activities. This data shows that travel agents in the Netherlands use 96% of the total goods and services for VAT taxable transactions. Travel agents may therefore deduct 96% of the input tax charged to them (unless a different calculation of actual use is made plausible).

Based on this analysis of different rules of evidence for different services, the Court sees reason to refer preliminary questions to the Supreme Court (a possibility for tax proceedings introduced in 2016). The following questions have been referred:

  1. In the event of a serious and real need of evidence, does the law allow that the claim may be substantiated with a presumption or with general statistical data that the recipient of a service is established outside the EU?
  2. If so, should general statistical data on bitcoin trading be used to determine the location of the buyers of mining activities, whereas the trading of bitcoins is not the same as the mining activities carried out by claimants?

As a result, the hearing of the case is suspended until the Supreme Court has answered the questions.  

Importance for practice

The outcome of this case may be relevant to the financial sector in a broader sense. This particular case concerns the rules of evidence for the right to deduct input tax in the event of non-EU turnover. In the financial sector this discussion concerns not only bitcoin mining activities, but possibly also currency exchange transactions, money transfers, market making activities, securities trading and other investment activities.


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