Belgium's Federal Public Service Finance (FPS) has issued a new statement finding that certain domestic digital currency transactions are not subject to value-added tax (VAT).

The ruling from the tax body was revealed in an email to local digital exchange Belgacoin, which was concerned it would need to pay VAT on digital currency trades.

Speaking to CoinDesk, an FPS spokesperson confirmed that bitcoin trading transactions are currently exempt from the country's VAT Code, as bitcoins are not a legal means of payment. However, the agency did suggest that this exemption may only be temporary.

FPS senior advisor and investigator Chantal Pahaut told CoinDesk:

The clarification comes at a time when many European countries are seeking larger guidance on the issue from the European Court of Justice (ECJ) as to whether digital currency exchanges need to pay VAT taxes on service fees.

The statements also mark the first time Belgium has provided insight into its policies on the issue. Belgacoin indicated that it is not clear if VAT applies to merchant-customer transactions.

The FPS said that bitcoin trading transactions are currently exempt from VAT under Article 44 of the country's VAT code, telling Belgacoin that should the determination be reversed, a retroactive tax will not be applied.

Belgacoin said the decision removes a critical uncertainty for the company, which buys and sells bitcoin as well as a host of altcoins including litecoin, dogecoin and peercoin.

Belgacoin told CoinDesk:

In its official post on Reddit announcing the news, Beglacoin indicated that the decision brings Belgium in line with the UK, which eliminated its VAT on bitcoin trading in March.

A form of consumption tax, VAT is assessed on the cost of the product, minus the cost of materials. In the case of Belgacoin, the company indicated it would need to add an additional 21% to the price of the digital currency it sells in order to cover this added expense.

Belgium's decision highlights a current split on this issue dividing Europe.

While Belgium and the UK have taken a more progressive stance on bitcoin trading, others like Estonia and Poland have imposed 20% and 23% VAT respectively on certain bitcoin business activities.

Ultimately, experts suggest that the ECJ's ruling on VAT for EU countries may not be forthcoming. European tax lawyer Esteban van Goor, for example, told CoinDesk in August that the decision could take up to two years to be delivered.

For now, however, Belgacoin indicated that the decision will allow the company, which makes only 1% margin on transactions, to better compete against other major international exchanges.

"It's nice for us, because we're trying to make it easier to buy for customers," the company added.

Correction: This article has been updated to clarify that this guidance only applies to bitcoin trading, not merchant-consumer transactions.

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