Hive Digital Technologies is taking a dispute over the VAT treatment of bitcoin mining in Sweden to the European Commission, after Swedish courts refused to refer the matter to the Court of Justice of the European Union (CJEU).
The case involves the Swedish Tax Agency and Hive subsidiaries Bikupa Datacenter AB and Bikupa Datacenter 2 AB. Its outcome could influence how cryptocurrency mining is classified across the EU and determine whether VAT rules apply to similar operations.
The dispute began after the Swedish Tax Agency changed its interpretation of the activities carried out by the two companies. Unlike its previous approach, the agency ruled that the subsidiaries were mining crypto assets on their own behalf, meaning the activity fell outside the scope of VAT.
Hive disputes that conclusion. It says Bikupa Datacenter AB and Bikupa Datacenter 2 AB were providing computing power to identified customers under contractual arrangements, in a way comparable to data centre hosting services, rather than mining digital assets for themselves.
That distinction has significant financial consequences because the Swedish authorities applied the revised interpretation retrospectively to several digital mining companies from 2022. The companies were required to repay VAT refunds they had already received.
Dentons, the law firm representing Hive, said the classification affects whether businesses can reclaim VAT paid on essential operating costs.
“Under the EU VAT rules, a business can generally recover input VAT where its purchases are used for taxable supplies, but recovery may be denied where the activity is outside the scope of VAT or exemptand for a data center business, where hardware, cooling and electricity are major costs, the classification therefore has a substantial financial effect,” it said.
Hive claims Swedish courts have not explained their decisions to reject a request for a referral to the CJEU. It also argues that such refusals have become systematic in tax litigation cases.
Dentons said the wider issue was how a group of related activities should be classified as “mining”. Hive’s position is that the arrangements require closer examination because they can involve the supply of computing power to a customer, the customer’s use of that power to mine digital assets, and other associated services.
The company is now asking the European Commission to consider the complaint. If the commission investigates and takes action, the case could establish a precedent for comparable disputes elsewhere in the region. However, the commission could also close the complaint without pursuing it further.
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