On July 13, it was reported that the Caucasian Republic of Georgia had exempted the imposition of value-added taxes (VAT) on digital currency trading.
Nodar Khaduri, who is the finance minister of Georgia, not long ago signed the legislation, which covers the taxation of companies and individuals in the country who engage in the trading of cryptocurrency as well as in the mining of it. The legislation, which became law in Georgia near the end of this past June, clearly defined what the country considers a cryptocurrency:
"Cryptocurrencies are digital assets that are exchanged electronically and based on a decentralized network. Their exchange does not require a reliable intermediary and they are managed using distributed ledger technology."
According to the new law, entities in Georgia can trade digital currencies for standard fiat currencies without incurring any value-added taxes. Value-added taxes are a form of sales tax used through much of world, in which the government taxes entities based on the value that they add to a particular product or service.
In spite of the new law, Khaduri made it clear that the Georgian lari is still the only legal tender in the country. He also made it clear that no other currencies, whether they be digital or fiat, can be used in the country for the purposes of making payments.
While the new law provides VAT-free cryptocurrency trading, it does impose VAT on those entities that engage in the mining of such currencies. The only exception to this are mining entities that are registered in other countries. Some experts think that imposing VAT on mining companies in the country could very well lead to these companies leaving the country.
The government of Georgia is not the first to exempt digital currency trading from VAT. In 2015, The European Union's Court of Justice declared that a Bitcoin exchange operating within its jurisdiction was exempt from VAT. This is considered by many to be a landmark ruling. Stefano Capaccioli, who is a lawyer in Italy who focuses of both digital currencies and gold, said that the decision was historic because it made it clear that Bitcoin would be treated no differently than any other currency.