“Bitcoins don’t fall under the usual definition of money or currency,” Hans Christian Holte, director general of taxation in Norway, told Bloomberg. “We’ve done some assessments on what’s the right and sound way to handle this in the tax system.”
The stance came as no surprise to Norwegian IT engineer Kristoffer Koch, who made headlines earlier this year when he revealed that he had made four million Norwegian kroner ($650,000) on a $27 bitcoin investment, enough to put down a deposit on an Oslo apartment.
“It was expected that it would be taxable,” he said. “The unexpected thing was that they talked about value added tax, and that doesn't make any sense for me. They defined bitcoin as a service, but how can you have capital gains on a service?”
The Norwegian stance came after Germany in August said it would impose a levy on the virtual currency.
Bitcoin has some of the characteristics of gold, as the potential supply is fixed by a mathematical formula. It's value is also not underwritten by any government or other agency.
There are about 12 million Bitcoins in circulation, according to Bitcoincharts.
Paul Ehling, an assistant professor of financial economics at BI Norwegian Business School, said the tax authorities had too restrictive a definition of currency.
“Currency is any agreed upon means of exchanges of goods and services, so you could have some small stones, as used in history, and if it’s accepted by a sufficiently large population, then that’s enough,” he told Bloomberg in an interview.
The price of a bitcoin on the Mt. Gox exchange climbed from about $12 a year ago to a peak of $1,200 at the start of December.
The price has since dropped below $840 in the currency's biggest correction since it was founded by in 2009 by “Satoshi Nakamoto”, the fictional name given by the developer or developers, whose identities remain unknown.