Key Takeaways
- Sweden reclassified Hive’s datacenter services as self-mining, retroactively denying input VAT recovery.
- Hive argues it provides taxable compute power, meaning the VAT change causes a major financial hit.
- Hive is taking the dispute to the European Commission, which could set a major tax precedent for the region.
Sweden and Hive Engaged in Battle Over Crypto Mining VAT Charges
After changing established criteria for collecting taxes tied to crypto mining activities, Hive Digital Technologies is locked in a legal battle against the Swedish government.
The core of the disagreement lies in the consideration of these services for VAT purposes, after the Swedish Tax Agency ruled that—in contrast to what it had applied before—Hive subsidiaries had been mining crypto on their own behalf, which falls outside the scope of VAT.
While this might appear beneficial at first, it hurts the finances of Bikupa Datacenter AB and Bikupa Datacenter 2 AB, two Hive Technologies subsidiaries located in the country. Hive argues that these companies were not mining crypto assets on their own, but rather supplying computing power services to identified customers under contract, an activity similar to a data center hosting agreement.
Dentons, the legal firm representing Hive, explained why this distinction, applied to several digital mining companies retroactively since 2022, matters financially.
“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 exempt—and for a data center business, where hardware, cooling and electricity are major costs, the classification therefore has a substantial financial effect,” it highlighted.
This criterion was applied retroactively to companies mining crypto assets since 2022, requiring repayment of VAT refunds already paid.
Hive Seeks a Higher Power
Hive is seeking to elevate this complaint to the European Commission, as Swedish courts have refused to refer this question to the Court of Justice of the European Union (CJEU).
Hive alleges that Swedish courts have failed to state the reasons for the refusal to refer this question to the CJEU, and that this refusal has become systemic in tax litigation cases.
Dentons explained that the issue lies in the classification of a family of activities just as mining, as Hive’s stance is that a more detailed observation of these activities is needed, as these include supplying computing power to a customer, the use of this power by the customer to mine digital assets, and other services.
The case might set a precedent for similar disputes in the region if the European Commission chooses to investigate further and take action. That said, it could also close the complaint without following on.
