Can we pool our knowledge regarding TAX and crypto and make some kind of FAQ/sticky?

Peregrinus

Fakent.ie wrote: »

Its possible to go euro/btc/Alt/alt/alt/alt/alt and so on

I don't think that matters, in principle.

When you swap the the BTC for Alt-A, you're disposing of the crypto. You need to identify the proceeds of the disposal. The proceeds are so many units of Alt-A, so what you need to do is put a euro value on X units of Alt-A. (This will normally, of course, be the same as the euro value of the BTC that you are disposing of, but but what you are actually looking for is not the value of the thing you disposed of, but the value of the proceeds of the disposal.)

The euro value of the Alt-A units at the time of the disposal does not depend on what you do, or intend to do, with the Alt-A units, so the fact that you subsequently swapped them for Alt-B, which in turn you swapped for Alt-C, and so in, is completely irrelevant to the business of valuing them at the time you got them in exchange for your BTC.

The later swaps of Alt-B for Alt-C, Alt-C for Alt-D, etc, are independent disposals, and in each case you have to assign a value the proceeds of the disposal. (I'm assuming these are all happening at spaced intervals, on different days.) But each of these valuation exercises is separate, and is unaffected by the others.

Yes, if you dispose of lots of different assets on lots of different days, you will have lots of different calculations to do. This is true regardless of whether the assets are crypto or something else. But the individual calculations themselves do not become more complicated.

Peregrinus

superg wrote: »

If I dispose of BTC to buy another coin, I use the FIAT value of BTC to determine its worth.

You swap X number of BTC for Y number of Othercoin. What you actually need to value is the disposal proceeds, Y number of Othercoin. However, pretty much by definition, the two sides of the swap have the same value; otherwise the transaction wouldn't happen. So X times the fiat value of BTC should be equal to Y times the fiat value of Othercoin. So you can value the proceeds be looking at the fiat value of either crypto.

And the same goes for an Othercoin-to-BTC swap; you can value the proceeds by looking at the value of either crypto involved.

Strictly speaking, you're always trying to value the disposal proceeds, the coins that you get in the transaction, rather than the coins that you give away. But since the two figures should be the same, in practice you can work off the value of whichever crypto is the easiest one to get an acccurate price quote for the date and time of the transaction.

superg wrote: »

And even if I was, the way BTC is going, by the time I make the trade back to BTC it could be worth thousands less than it was when I first used it to by the other coin therefore no FIAT gain in BTC is made, but I have made a BTC gain. All through January as BTC slumped all my trades increased my BTC holdings but the value of that BTC was less than what it was when the trade was initiated.

I'm a bit confused. If you swap BTC for Othercoin, then hold the Othercoin while the price of BTC slumps, and then swap back in to BTC, the price movement in BTC will not give you either a gain or a loss, because you weren't holding any BTC. Whether you made a gain or a loss will depend on movements in the value of your holding of Othercoin during the period when you held it, not the movements in the value of BTC.

superg wrote: »

I'm not interested in BTC's current value in FIAT, my whole aim in trading is to increase my holdings of certain coins in the hope that they'll be worth far more when I do actually convert to FIAT than they are right now. And that time is at least a year away, maybe even longer. I'll be trading all year but I won't be turning any of it into cash. Unless of course I have to to pay the tax man.

As long as you're buying and holding the "certain coins", you have no liability to CGT; CGT liability only arised when you dispose of things.

Of course, if you dispose of something in order to buy the "certain coins", then you may (or may not) have a CGT liablity - not in relation to the certain coins, but in relation to the disposal of whatever it was that you disposed of in order to buy them.

h0neybadger

Peregrinus wrote: »

When do they dispose of the crypto, and where are they resident and ordinarily resident when they dispose of it?

They dispose of the Crypto after 3-4 years.
But during that time, they have no residence.

Say, the person rented a house in Ireland. Bought Bitcoin, and other Alt’s.
Put them on a wallet.
Left job, left rented house, sold all possessions.

Went travelling for 3-4 years, staying 2-3 months in different countries.

Once finished, decided to sell Crypto. And that person was currently still abroad, staying in hotel etc.

Peregrinus

h0neybadger wrote: »

They dispose of the Crypto after 3-4 years.
But during that time, they have no residence.

Say, the person rented a house in Ireland. Bought Bitcoin, and other Alt’s.
Put them on a wallet.
Left job, left rented house, sold all possessions.

Went travelling for 3-4 years, staying 2-3 months in different countries.

Once finished, decided to sell Crypto. And that person was currently still abroad, staying in hotel etc.

It's kind of difficult to be tax resident nowhere, since a lot of countries have fairly far-reaching residency laws that will attempt to keep a clutch on you unless and until you establish residence somewhere else. I'm not saying that it's impossible to be tax resident nowhere, but to be certain that you are tax-resident nowhere you need to be abreast of the tax laws and practices of a lot of different countries.

Most people who have enough money to make it worth their while to organise their lives around minimising their tax don't aim to be tax-resident nowhere; they aim to be tax-resident in a jurisdiction with very low taxes. This is much easier to pull off successfully and reliably.

If all you are worried about is avoiding capital gains tax on the disposal of some asset that you hold, the job is even easier; you just need to become a resident of a country that doesn't tax capital gains. There are quite a few of these; Belgium is a notable one and one in which EU nationals, of course, have a right to reside. New Zealand has no capital gains tax, if you want an English-speaking country.

The problem with this strategy is that to avoid Irish CGT it's not enough to be resident in Belgium or New Zealand; you also have to be not resident or ordinarily resident in Ireland. (It's perfectly possible to have tax residence in two or more countries.) And "ordinary residence" is the kicker here, since if you start out by being resident and ordinarily resident in Ireland, as most of us are, it will take three years away to lose ordinary resident status.

Which may be fine from a travel point of view; you might quite fancy three years in New Zealand, if you can organise a visa. But from an investment point of view, it means you have to defer selling your crypto for three years. And three years in the future, of course, your crypto could be worth as little as it was three years in the past.

My point is not to rain on anybody's crypto parade; my point is that with a highly volatile asset like crypto you do not want to be committed to making investment and disposal decisions based on criteria that have nothing to do with the investment characteristics of the asset. The right time to sell your crypto should be a decision driven by investment considerations. It makes no sense to prioritise avoiding tax on your gain over priorising realising a gain in the first place.

.G.

Peregrinus wrote: »

I'm a bit confused. If you swap BTC for Othercoin, then hold the Othercoin while the price of BTC slumps, and then swap back in to BTC, the price movement in BTC will not give you either a gain or a loss, because you weren't holding any BTC. Whether you made a gain or a loss will depend on movements in the value of your holding of Othercoin during the period when you held it, not the movements in the value of BTC.

OK so I do a number of trades, sometimes I'll get one a day sometimes only one a week but always end up with more BTC than I started with. For example, I use my BTC to buy Alt - a as I know that within a few days the price of Alt A will rise and then I sell my holding of it back to BTC. Rinse and repeat everytime the chart allows it. So say I realise a gain of 15% in BTC terms over a few days on one trade but at the same time the fiat value of BTC has dropped by 20% over the same time period then I've made a fiat loss while at the same time as making a BTC gain. So if I've to relate everything back to fiat for tax purposes then I don't have a gain in fiat to report for that trade even though I have actually made a gain!

Granted this scenario hasn't happened most of the time but it was happening all through January.

AlmightyCushion

superg wrote: »

OK so I do a number of trades, sometimes I'll get one a day sometimes only one a week but always end up with more BTC than I started with. For example, I use my BTC to buy Alt - a as I know that within a few days the price of Alt A will rise and then I sell my holding of it back to BTC. Rinse and repeat everytime the chart allows it. So say I realise a gain of 15% in BTC terms over a few days on one trade but at the same time the fiat value of BTC has dropped by 20% over the same time period then I've made a fiat loss while at the same time as making a BTC gain. So if I've to relate everything back to fiat for tax purposes then I don't have a gain in fiat to report for that trade even though I have actually made a gain!

Granted this scenario hasn't happened most of the time but it was happening all through January.

Whilst you have made a gain in BTC, because BTC has dropped in price in Euro you have made a loss in Euro so for CGT purposes you have made a loss.

Say, I want to buy some shares that are sold in dollars. I convert €10,000 to dollars and I get $10,000 and I buy 10 shares valued at $1,000 each. The shares do well and increase 10%. My shares are now worth $11,000 and I sell and keep the $11,000. I don't convert back to euro for whatever reason, maybe I believe the dollar will increase in value some day. Between the time I bought and sold the shares, the euro has gotten stronger and my $11,000 is now only worth €9,000. So whilst my shares increased in value in dollars, they decreased in value in euros so I actually lost money. For CGT purposes I have lost €1,000 on my investment.

.G.

AlmightyCushion wrote: »

Whilst you have made a gain in BTC, because BTC has dropped in price in Euro you have made a loss in Euro so for CGT purposes you have made a loss.

Say, I want to buy some shares that are sold in dollars. I convert €10,000 to dollars and I get $10,000 and I buy 10 shares valued at $1,000 each. The shares do well and increase 10%. My shares are now worth $11,000 and I sell and keep the $11,000. I don't convert back to euro for whatever reason, maybe I believe the dollar will increase in value some day. Between the time I bought and sold the shares, the euro has gotten stronger and my $11,000 is now only worth €9,000. So whilst my shares increased in value in dollars, they decreased in value in euros so I actually lost money. For CGT purposes I have lost €1,000 on my investment.

Which is all fine but it comes back to the point that for crypto to crypto trades, unless we convert it back to euros there can never be a gain/loss that's reportable. So having to account for all trades seems a bit pointless cos some don't have a natural fiat pair and to convert it back to fiat may not even result in a gain even though the trade itself had produced a gain in the thing you are trading, crypto.

The reverse is also true, while BTC was skyrocketing last December I was doing my usual and increasing my BTC holding. But even without even having to make profit in any trade my paper fiat worth was increasing all the time even though none of my coins where ever converted to fiat.

Cryptonovice

I buy ETH @ €637.3. I spend €150 and receive 0.2281097 ETH. subtotal = €145.37 (637.3 x 0.2281097) and the remainder went on fees.

When I send it to exchange 2 to swap for ripple (XRP) it says I sent €133 worth of ETH.

The market value of XRP at the time of the swap (according to coinmarketcap to 5 minutes) was €1.21 and €606 for ETH.
(606x 0.2281097 = €138)
1.21/606 = 0.001996.
The trading price on exchange 2 was recorded as 0.00179 when I traded ETH with XRP. I got 126 no XRP @ €1.21= €152.46.

My long winded question is it okay to just say original total cost of €150 (coin A) vs €152.46 (Coin ...€2.46 into CG1 form...as I am staying the right side of the losses and I just want to keep it simple.
Thanks in advance

Peregrinus

superg wrote: »

Which is all fine but it comes back to the point that for crypto to crypto trades, unless we convert it back to euros there can never be a gain/loss that's reportable. So having to account for all trades seems a bit pointless cos some don't have a natural fiat pair and to convert it back to fiat may not even result in a gain even though the trade itself had produced a gain in the thing you are trading, crypto.

What does not having a "natural fiat pair" have to do with anything? The assets you are acquring and disposing of have a value, and that value will determine whether you have made a loss or a gain. I can't think of any reason why you would ignore the loss or gain for tax purposes because you can't identify a "natural fiat pair", whatever that is. For that matter, I can't think of any reason why you would ignore the loss or gain when evaluating the success of your own investment strategy.

superg wrote: »

The reverse is also true, while BTC was skyrocketing last December I was doing my usual and increasing my BTC holding. But even without even having to make profit in any trade my paper fiat worth was increasing all the time even though none of my coins where ever converted to fiat.

So what? Why should the Revenue care whether you convert them to fiat or to something else? That's your business. All the Revenue cares about is that you have diposed of your asset and thereby locked in whatever gain or loss results from changes in its value. What you choose to do with the gain or loss has no bearing on the tax consequences of the disposal.

Peregrinus

Cryptonovice wrote: »

I buy ETH @ €637.3. I spend €150 and receive 0.2281097 ETH. subtotal = €145.37 (637.3 x 0.2281097) and the remainder went on fees.

When I send it to exchange 2 to swap for ripple (XRP) it says I sent €133 worth of ETH.

The market value of XRP at the time of the swap (according to coinmarketcap to 5 minutes) was €1.21 and €606 for ETH.
(606x 0.2281097 = €138)
1.21/606 = 0.001996.
The trading price on exchange 2 was recorded as 0.00179 when I traded ETH with XRP. I got 126 no XRP @ €1.21= €152.46.

My long winded question is it okay to just say original total cost of €150 (coin A) vs €152.46 (Coin ...€2.46 into CG1 form...as I am staying the right side of the losses and I just want to keep it simple.
Thanks in advance

I as see it:

There's only one disposal here. You disposed of your holding of ETH. You have only one gain/loss calculation to do.

The acquisition cost of your holding of ETH was €150, including charges.

You disposed of your holding of ETH for a holding of XRP which, at the market price at the time of the disposal had a value of €152.46

So your gain is (€152.46 - €150 €2.46.

Later, when you dispose of your XRP, you will do a similar calculation. The acquistion cost of your XRP in that calculation will be €152.46, and your disposal proceeds will be whatever they will be.

Cryptonovice

Peregrinus wrote: »

I as see it:

There's only one disposal here. You disposed of your holding of ETH. You have only one gain/loss calculation to do.

The acquisition cost of your holding of ETH was €150, including charges.

You disposed of your holding of ETH for a holding of XRP which, at the market price at the time of the disposal had a value of €152.46

So your gain is (€152.46 - €150 €2.46.

Later, when you dispose of your XRP, you will do a similar calculation. The acquistion cost of your XRP in that calculation will be €152.46, and your disposal proceeds will be whatever they will be.

Peregrinus thanks again. Helpful as always.

.G.

Peregrinus wrote: »

What does not having a "natural fiat pair" have to do with anything? The assets you are acquring and disposing of have a value, and that value will determine whether you have made a loss or a gain. I can't think of any reason why you would ignore the loss or gain for tax purposes because you can't identify a "natural fiat pair", whatever that is. For that matter, I can't think of any reason why you would ignore the loss or gain when evaluating the success of your own investment strategy.


So what? Why should the Revenue care whether you convert them to fiat or to something else? That's your business. All the Revenue cares about is that you have diposed of your asset and thereby locked in whatever gain or loss results from changes in its value. What you choose to do with the gain or loss has no bearing on the tax consequences of the disposal.

I don't ignore anything and yes they all have value but the value of most of them is only in other cryptos. It takes at least 2 disposals/conversions to get back to euros. The advice is we need to pay tax on all disposals of crypto and to do that you want us to try and convert them back to fiat to work out if a fiat gain was made and pay it. Whereas in my scenario a fiat gain was not made but the disposal still occurred and accrued another form of gain. Is this gain not taxable? If everything has to be related back to fiat then it makes a mockery of the advice given here and by revenue that every disposal, even crypto to crypto is taxable and any gain is liable to CGT so if I've made a crypto gain I need to give revenue 33% of it. If I've to pay tax on all gains, even crypto to crypto ones then how the hell do I do it if i made a gain in one crypto but a loss in euros. Who decides that the euro loss is the important transaction and not the BTC gain. To be fair and thanks for your answers but you don't have all the answers so I've asked them myself. I await their reply with interest.

The whole thing does my bloody head in. Its actually making me consider stopping trading even though my trading has been very successful in the aim I have for it which is not to increase my FIAT wealth but to increase my holdings of certain cryptos without actually spending any of my money to do so and with a view to seeing what they are worth at some undetermined point down the line. I have no actual real cash riding on it.

As for all revenue care about. In my mind all they care about is me paying them tax when I've made real money and I'll happily do so. I can't pay them tax if I haven't made real actual money from it. If all they care about is that I've disposed one crypto for another and made a gain then surely they wouldn't care that the gain, when reverted back to fiat was actually a loss because they aren't interested in that, I wasn't trading fiat, I was trading crypto and that's where my gain occurred. Conflicting advice it seems to me.

.G.

Quick final one. Lets say I have some BTC. I earned it in 2017. I haven't bought it or traded any money for it in 2018. I use that BTC to buy tron for example. I've now disposed of my BTC. How do I work out if I've made a gain in disposing that BTC in this tax year since I didn't acquire it in this tax year?

GreeBo

superg wrote: »

I don't ignore anything but the advice is we need to pay tax on all disposals of crypto and to do that you want us to try and convert them back to fiat to work out if a fiat gain was made and pay it. Whereas in my scenario a fiat gain was not made but the disposal still occurred and accrued another form of gain. Is this gain not taxable? If everything has to be related back to fiat then it makes a mockery of the advice given here and by revenue that every disposal, even crypto to crypto is taxable and any gain is liable to CGT. If I've to pay tax on all gains, even crypto to crypto ones then how the hell do I do it if i made a gain in one crypto but a loss in euros. Who decides that the euro loss is the important transaction and not the BTC gain. To be fair and thanks for your answers but you doin't have all the answers and I've asked them myself. I await their reply with interest.

The whole thing does my bloody head in. Its actually making me consider stopping trading even though my trading has been very successful in the aim I have for it which is not to increase my FIAT wealth but to increase my holdings of certain cryptos without actually spending any of my money to do so and with a view to seeing what they are worth at some undetermined point down the line. I have no actual real cash riding on it.

As for all revenue care about. In my mind all they care about is me paying them tax when I've made real money and I'll happily do so. I can't pay them tax if I haven't made real actual money from it. If all they care about is that I've disposed one crypto for another and made a gain then surely they wouldn't care that the gain, when reverted back to fiat was actually a loss because they aren't interested in that, I wasn't trading fiat, I was trading crypto and that's where my gain occurred. Conflicting advice it seems to me.

Its a gain in FIAT value, not an actual FIAT gain that is taxable.

GreeBo

superg wrote: »

Quick final one. Lets say I have some BTC. I earned it in 2017. I haven't bought it or traded any money for it in 2018. I use that BTC to buy tron for example. I've now disposed of my BTC. How do I work out if I've made a gain in disposing that BTC in this tax year since I didn't acquire it in this tax year?

You disposed of it in this tax y ear

.G.

GreeBo wrote: »

You disposed of it in this tax y ear

Yes but to calculate a gain or loss I need to assign an acquisition value to it and I acquired it last year. Also I'm sure you'll say that whatever euro price of bitcoin was way back then, I can get my value from that but I didn't acquire it using euros. I acquired it from the sale of another crypto. If I use euros then great cos as we all know, the value of it since then has plummeted which means all my successful BTC gains have been made at a euro loss so most likely so I'll be paying 0 tax.

.G.

GreeBo wrote: »

Its a gain in FIAT value, not an actual FIAT gain that is taxable.

So then everything must be brought back to FIAT in order to work out if gains or losses are made. You don;t have to sell it back to euro but you have to convert to eth or BTC and then to fiat to work out its fiat value. Which seems silly if you aren't selling them back to ETH or BTC. You're involving currencies that were never part of the trade, and I include euros in that.

Cryptonovice

superg wrote: »

I don't ignore anything and yes they all have value but the value of most of them is only in other cryptos. It takes at least 2 disposals/conversions to get back to euros. The advice is we need to pay tax on all disposals of crypto and to do that you want us to try and convert them back to fiat to work out if a fiat gain was made and pay it. Whereas in my scenario a fiat gain was not made but the disposal still occurred and accrued another form of gain. Is this gain not taxable? If everything has to be related back to fiat then it makes a mockery of the advice given here and by revenue that every disposal, even crypto to crypto is taxable and any gain is liable to CGT so if I've made a crypto gain I need to give revenue 33% of it. If I've to pay tax on all gains, even crypto to crypto ones then how the hell do I do it if i made a gain in one crypto but a loss in euros. Who decides that the euro loss is the important transaction and not the BTC gain. To be fair and thanks for your answers but you don't have all the answers so I've asked them myself. I await their reply with interest.

The whole thing does my bloody head in. Its actually making me consider stopping trading even though my trading has been very successful in the aim I have for it which is not to increase my FIAT wealth but to increase my holdings of certain cryptos without actually spending any of my money to do so and with a view to seeing what they are worth at some undetermined point down the line. I have no actual real cash riding on it.

As for all revenue care about. In my mind all they care about is me paying them tax when I've made real money and I'll happily do so. I can't pay them tax if I haven't made real actual money from it. If all they care about is that I've disposed one crypto for another and made a gain then surely they wouldn't care that the gain, when reverted back to fiat was actually a loss because they aren't interested in that, I wasn't trading fiat, I was trading crypto and that's where my gain occurred. Conflicting advice it seems to me.

Will you please ket us know what they say thanks.

GreeBo

superg wrote: »

So then everything must be brought back to FIAT in order to work out if gains or losses are made. You don;t have to sell it back to euro but you have to convert to eth or BTC and then to fiat to work out its fiat value. Which seems silly if you aren't selling them back to ETH or BTC. You're involving currencies that were never part of the trade, and I include euros in that.

Yes, because gains and losses are calculated in euro.

It's only silly because you are buying assets that are not traded in EUR.
If you were buying your alts in USD you would be doing the same thing.

You only need to use whatever bridge currency gets you back to a EUR value.
Presumably you are aware of the overall EUR position, otherwise I'm not sure how you are deciding what/when to trade.

How else do you think it should work?

.G.

GreeBo wrote: »

Yes, because gains and losses are calculated in euro.

It's only silly because you are buying assets that are not traded in EUR.
If you were buying your alts in USD you would be doing the same thing.

You only need to use whatever bridge currency gets you back to a EUR value.
Presumably you are aware of the overall EUR position, otherwise I'm not sure how you are deciding what/when to trade.

How else do you think it should work?

On point 1, I read a chart, I don't need to know what value something is in euros, I only need to know what value it is in whatever crypto I'm using to buy it. Principle is the same, buy low, sell higher, end up with more of the original crypto. Gain realised but not in euros.

Point 2, If I make a gain in a crypto I pay them 33% of that crypto for their troubles. If they are happy to wait until I sell those coins back to euros via BTC or ETH I can pay them in euros then but apparently that's not an option, they want their tax in euros even when I haven't actually made a gain in euros.

Anyway I've had a look at that tax calculating software somebody linked to a few weeks back which I'll have to have a proper look at but it requires manual entry of BTC and ETH deposits and the exchanges I use don't seem to list withdrawal and deposit fees or exact deposit times etc so I'll have to figure that out.

Any idea how to look up a wallet address and find out what exchange its from? I have the transaction ids and the wallets the coins came from and went to but some records of deposits and withdrawals on the exchanges I use don't seem to match all the deposits and withdrawals I know I have done.

.G.

Cryptonovice wrote: »

Will you please ket us know what they say thanks.

I will.

Peregrinus

superg wrote: »

I don't ignore anything and yes they all have value but the value of most of them is only in other cryptos. It takes at least 2 disposals/conversions to get back to euros.

So? Why should that make any difference?

superg wrote: »

The advice is we need to pay tax on all disposals of crypto and to do that you want us to try and convert them back to fiat to work out if a fiat gain was made and pay it.

No, you don’t have to convert your crypto to fiat. You just have to express its value in euros.

superg wrote: »

Whereas in my scenario a fiat gain was not made but the disposal still occurred and accrued another form of gain. Is this gain not taxable?

It is not taxable. It is not really a “gain” in any meaningful sense. Having a larger number of something doesn’t mean that you have any greater wealth. What matters is the value of what you have, not the quantity.

superg wrote: »

If everything has to be related back to fiat then it makes a mockery of the advice given here and by revenue that every disposal, even crypto to crypto is taxable and any gain is liable to CGT so if I've made a crypto gain I need to give revenue 33% of it. If I've to pay tax on all gains, even crypto to crypto ones then how the hell do I do it if i made a gain in one crypto but a loss in euros. Who decides that the euro loss is the important transaction and not the BTC gain. To be fair and thanks for your answers but you don't have all the answers so I've asked them myself. I await their reply with interest.

The only gain or loss that matters for tax (or any other) purposes is the gain in euros. The fact that as a result of series of transactions you now have (say) 100 units of CoinA when you started out with (say) 80 units it not a “gain” if, in fact, 100 units of CoinA is today worth less than 80 units were when you started out. That’s a loss.

There’s nothing novel or surprising about this proposition. This kind of thing happens all the time with people who buy and sell shares. You might be investing in shares that are traded on the New York Stock Exchange, and find that, as the combined effect of your transactions, movements in the share price (quoted in dollars) and movements in the dollar/euro exchange rate, you now hold more shares in number, but with a lesser value in euros, than when you started. You’ve made a loss. No sane person would think otherwise. The Revenue certainly won’t.

superg wrote: »

The whole thing does my bloody head in. Its actually making me consider stopping trading even though my trading has been very successful in the aim I have for it which is not to increase my FIAT wealth but to increase my holdings of certain cryptos without actually spending any of my money to do so and with a view to seeing what they are worth at some undetermined point down the line. I have no actual real cash riding on it.

What you’re saying there is that your investment strategy is not, at this stage, to seek to make immediate gains, but instead to build up your holdings of the cryptos that you expect or hope will appreciate most in value in the long term. What you’re doing, perhaps, is a variation on what’s called “penny share” investment in the US, where people buy shares with a low unit price on the theory that such shares have a greater capacity for future growth. When the share price falls, they take this as a signal to buy more of the share.

I refrain from offering any advice on the soundness of the investment theory. I’ll just say that if you are following such a strategy, it’s entirely possible that at this stage in your investment activities you are not yet realising any gains. If you buy CoinA in the hope or expectation that it will appreciate in value, but then decide that CoinB has a better prospect of long-term appreciation and so swap your CoinA for CoinB before CoinA has actually appreciated in value, there will be a disposal but no gain.

superg wrote: »

As for all revenue care about. In my mind all they care about is me paying them tax when I've made real money and I'll happily do so. I can't pay them tax if I haven't made real actual money from it. If all they care about is that I've disposed one crypto for another and made a gain then surely they wouldn't care that the gain, when reverted back to fiat was actually a loss because they aren't interested in that, I wasn't trading fiat, I was trading crypto and that's where my gain occurred. Conflicting advice it seems to me.

They don’t care whether you’ve made real money; they care whether you have made a real gain. If you gave €100, or something worth €100, to acquire your holding of CoinA, and later you dispose of your holding of CoinA for €150 or for something worth €150, you’ve made a real gain of €50. This is true regardless of whether what you got was €150 in cash, or something with a value of €150.

I don’t see why this should do anybody’s head in, really. Conceptually, it’s pretty straightforward.

Peregrinus

superg wrote: »

Quick final one. Lets say I have some BTC. I earned it in 2017. I haven't bought it or traded any money for it in 2018. I use that BTC to buy tron for example. I've now disposed of my BTC. How do I work out if I've made a gain in disposing that BTC in this tax year since I didn't acquire it in this tax year?

You look at what you paid to acquire it in 2017, in euro terms. You look at the value of what you got when you disposed of it in 2018, also in euro terms. The difference between these two figures is the gain or loss you have realised by disposing of the BTC. You realised that gain or loss in 2018, since that was the year in which you disposed of the BTC.

Let's say that you bought 1 BTC on 1 April 2017, and the value at that time was $1,322. You either paid $1,322 in US currency, or you paid with some other crypto, but it had a value of $1,322. (We can be confident of this because you would not be stupid enough to pay with crypto with a value of more than $1,322, and the seller would not be stupid enough to accept crypto with a value of less than $1,322. If one of you were that stupid, then obviously you would have to do this calculation by looking at the value of whatever crypto you paid with.) So your acquisition cost was $1,322, which given the USD/EUR exchange rate on 1 April 2017 was equivalent to €1,411.

So that's your acquisition cost: €1,411.

Right. You dispose of your BTC on 1 February 2018 for the then market price of $9,052. Again, it doesn't make any difference whether you get $9,052 in US currency, or other assets worth $9,052. At the USD/EUR exchange rate that prevailed on 1 February 2018, that's equivalent to €11,259.

So that's your disposal proceeds: €11,259.

Your gain is €11,259 - €1,411 = €9,848.

Note that we've been able to do this calculation without enquiring what crypto you used to buy, or what crypto you got when you sold, or the number of units of each that were involved in the transaction, or the price of each. We assume that, in each case, the other crypto has the same value as the BTC, since otherwise the transaction wouldn't have happened. You can, if you wish, redo the calculation looking not at the value of the BTC but at the value of the other cryptos involved, given the prices prevailing at the time. The answer shouldn't be materially different from €9,848.

davberd

superg wrote: »

Anyway I've had a look at that tax calculating software somebody linked to a few weeks back which I'll have to have a proper look at but it requires manual entry of BTC and ETH deposits and the exchanges I use don't seem to list withdrawal and deposit fees or exact deposit times etc so I'll have to figure that out.

I'm using bitcoin.tax and had to do very little manual data entry. I had to add a few opening trades from a couple of years ago, and some opening positions. For everything else they provide instructions on how to import trading data from lots of exchanges. All in all, I've found it very good and it has opened up my eyes about how the composition of your portfolio can change quite quickly, and in turn your tax liability. Essentially I owe a lot more CGT than I thought and the cost base of my portfolio is much higher. The higher cost base means that any future gains I realise will have a lower CGT liability that I thought (silver lining...hmmm). One danger that I could quickly see is that if you had bought low, sold high, then reinvested, and the market plummets, then you could be left with a hefty liability with possibly no means to pay it.

Peregrinus

davberd wrote: »

. . . . One danger that I could quickly see is that if you had bought low, sold high, then reinvested, and the market plummets, then you could be left with a hefty liability with possibly no means to pay it.

This is a standard risk when shifting investments between volatile assets. When you crystallise a gain by disposing of an asset, you need to think about how you're going to address the associated tax liability, when it falls due. If you have other assets available to you out of which you could pay it if necessary, great. If you don't, then it's risky to roll over the entire proceeds into another volatile asset because, as you point out, you could lose it. So don't do this, kids.

davberd

In my case I paid CGT last year and I'll top it up soon enough (even if it really pains me). However, I wonder how this is going to play out in the coming years. If you look at BAT (Basic Attention Token), for example, which is an ERC20 token living on the Ethereum blockchain. They've signed up lots of content providers on youtube and other websites where holders of the BAT token can pay/tip musicians/bloggers a few bob in appreciation for their efforts. In this case, the token is acting like a currency but obviously is being speculated on as well. The thing is as soon as someone buys a few euro worth of BAT and start tipping a couple of euro here and there, they're being dragged into the world of having to think about CGT. I don't like this idea at all - I see it stifling these innovations. I'm wondering if anyone has any thoughts on this?

Peregrinus

davberd wrote: »

In my case I paid CGT last year and I'll top it up soon enough (even if it really pains me). However, I wonder how this is going to play out in the coming years. If you look at BAT (Basic Attention Token), for example, which is an ERC20 token living on the Ethereum blockchain. They've signed up lots of content providers on youtube and other websites where holders of the BAT token can pay/tip musicians/bloggers a few bob in appreciation for their efforts. In this case, the token is acting like a currency but obviously is being speculated on as well. The thing is as soon as someone buys a few euro worth of BAT and start tipping a couple of euro here and there, they're being dragged into the world of having to think about CGT. I don't like this idea at all - I see it stifling these innovations. I'm wondering if anyone has any thoughts on this?

If you buy foreign currency in order to make purchases in foreign-land, that's generally not regarded as an investment transaction and any gain or loss that accrues to you as a result of exchange rate movements is ignored - gains not taxable, losses not offsettable against other gains. (If you're doing this in the course of a trade, exchange gains and losses will feed through to your profits, and so be subject to income tax, but that's a different matter.)

I think you could argue strongly (and probably successfully) for analogous treatment for cryptocurrencies (which are, after all, supposed to be currencies). If you buy some BAT in order to pay for online content, and you actually use it to make normal and reasonable payments for online content, I don't think that's a transaction that attracts CGT. But if you buy a bunch of BAT, sit on it and then sell it for fiat or swap it for, say, ETH, that's going to attract CGT.

As previously mentioned on this thread, CGT is a self-assessment tax, so in the first instance you get to decide which of your dealings in BAT are investment transactions and taxed as such, and which are not. But the Revenue will nail you to the wall if they don't think your view is formed in good faith.

nompere

Peregrinus wrote: »

If you buy foreign currency in order to make purchases in foreign-land, that's generally not regarded as an investment transaction ...

I don't think Revenue agree with that statement:

https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-19/19-01-14a.pdf

.G.

Thanks for your answers Peregrinus and davberd. I'll look into that other tax website. The first one is fine except its having trouble with my csv files from bitfinex as its saying they don't have time stamps for the trades on them. Need to sort that because its a great site, they do all the work for me so I can remain trading relatively headache free with regards to my tax position. I haven't made a euro gain in 2017, that much I'm certain of even without the program. In 2018 so far with the way BTC went I'm pretty sure I haven't made one yet either but once a euro gain is realised I'll sell enough assets to pay it.

Cryptonovice

Anyone see Litepay (Litecoin) to be released feb 26th..game changer they reckon..ability yo change Litecoin to fiat and visa versa instantly...wonder how revenue will view that one...we may be the only country on earth held back as usual..there will be a serious amount of cg1 forms going in if they stick to their nonsense