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

jobless

NewApproach wrote: »

The rules are quite clear.

not for crypto they aint.....

SW1985

Sorry if this has already been covered. I've mainly invested in Altcoins. To do this I've had to convert fiat to BTC or ETH and then exchange those for my chosen altcoins. I've then held the altcoins and made profits from them. How does my taxation work in this case?

In order to cash out I'll have to convert back to BTC/ETH. And then from BTC/ETH to fiat. The CGT will apply to the trade from altcoins back to say BTC? Then I'll be able to convert BTC to fiat without being taxed again?

thegolfer

jobless wrote: »

not for crypto they aint.....

The rules for taxation are quite clear. The distinction of income tax over capital gains tax falls mainly I would think to the frequency and intentions Of The trader. For now most transactions would fall to CGT.

Having said that peoples issues reading the quotes above seem to be around whether the crypto currency is an asset for cgt purposes.

Specifically Legislation defines an asset as....S532 TCA.

All forms of property shall be assets for the purposes of the Capital Gains Tax Acts whether situated in the State or not, including –

(a) options, debts and incorporeal property generally,

(b) any currency other than [the currency of the State]1, and

(c) any form of property created by the person disposing of it, or otherwise becoming owned without being acquired.

If not under S.532(a), then the incorporeal property as intangible assets (b) would cover the definition.

This definition can be very wide in it's application,which is to be expected.

GreeBo

I asked my accountant!

Unless you are massively day trading and want to argue its income tax then it's CGT.

This may change, but for now and for any historical gains, CGT is liable as outlined multiple times

GreeBo

SW1985 wrote: »

Sorry if this has already been covered. I've mainly invested in Altcoins. To do this I've had to convert fiat to BTC or ETH and then exchange those for my chosen altcoins. I've then held the altcoins and made profits from them. How does my taxation work in this case?

In order to cash out I'll have to convert back to BTC/ETH. And then from BTC/ETH to fiat. The CGT will apply to the trade from altcoins back to say BTC? Then I'll be able to convert BTC to fiat without being taxed again?

Taxed every time you dispose, i.e. change currency.
All covered with examples in the last page or so

ZeroThreat

ZeroThreat wrote: »

problem there (as previously mentioned on some threads in these forums), is that you have to spend 3 full years resident there before revenue stop chasing you for taxes.

Strangely enough, you're ineligible to vote during all this period, seems to me it's taxation without representation for the sheeple.

EagererBeaver wrote: »

You think you should be eligible to vote as soon as it start paying tax? I think it's perfectly fine to have a minimum period of residency.

As I moved to Spain to take up employment, I pay a flat 24% tax on all my employment income. That's it. All crypto profits are free.

Beaver, sorry just reading back here, I wasn't talking about eligibility to vote where you emigrate to. I was talking about being liable for capital gains up to 3 years after leaving Ireland despite being unable to vote there from the moment you leave.

Irrelevant to the overall thread (just my own p.o.v) but just wanted to clarify what I meant.

NewApproach

jobless wrote: »

not for crypto they aint.....

Why? Cryptos are a chargeable asset as they are a currency other than Euro. As others have indicated, unless you may be considered to be conducting a trade of trading cryptos which would require a significant degree of volume/scale (albeit this isn't categorically defined in any case, not just crypto), each and every transaction is a chargeable event for CGT purposes.

The interpretation of the existing rules and applying them to crypto couldn't be simpler.

Peregrinus

sublime1 wrote: »

Can you, even for a second, recognise that there may be shades of grey here, and that crypto is actually something new and different from fiat currencies, and that maybe new rules are needed, and that maybe a case could be made to the Revenue Commissioners for a new model of taxation for these complex financial instruments?

Sure. Although note that the Revenue administer the tax laws; they don't write them. So the case for change in the rules ultimately has to be made to the politicians and, until that case is made, and the politicians accept it and act on it, there is no change in the rules, and the current rules apply, even if you are correct in thinking that they are in some respects inappropriate.

And any change, when made, is very unlikely to be retrospective. So the gains you make this year are taxed under this year's rules, and this won't be affected if new, different or amended rules come into force next year.

Peregrinus

sublime1 wrote: »

How do you even know that Revenue will consider CGT as the appropriate type of taxation for crypto? If you recall my initial post at the start of this thread, I mentioned that I have spoken to an accountant, and that it was he who suggested that gains from crypto trading may even be considered as income tax. Which is obviously even more onerous for many people than CGT . . . .

Earnings from trading in anything are taxed as income and not as capital gains. The blurry line is when a pattern of buying and selling assets stops being investment activity and starts being the carrying on of a trade, but there is no reason to think that the Revenue would approach this differently where the assets in question are cryptocurrencies as opposed to anything else.

In general this issue arises in practice because someone who has been buying and selling assets actively has made an enormous loss (the bubble has burst!). He argues that he has been carrying on a trade, and the losses from his trade can be set off against the earnings from his day job, reducing or eliminating his income tax bill for the year. The Revenue, for obvious reasons, prefer to take the opposite view.

Where the buying-and-selling has been profitable, the taxpayer is very unlikely to argue that it was a trade, since - as you point out - this would result in a higher tax bill. He'll report it as capital gains, and it's up to the Revenue to challenge that. if and when the crypto bubble bursts, then the crypto investors will all pile in with arguments that they have been carrying on a trade.

While there's plenty of scope for argument here, there's no reason at all to think that this argument will play out any differently if the assets being bought and sold are cryptocurrencies. Nothing in the relevant provisions of the Taxes Acts would suggest that cryptocurrencies are any different, in this regard, than other assets.

If your accountant is suggesting to you that there could be doubt over whether your pattern of buying-and-selling cryptocurrencies will be treated as investment activity or as a trade, the doubt doesn't arise for the fact that what you are buying-and-selling are cryptocurrencies; it arises from the the fact that your particular pattern of buying-and-selling is close to the fuzzy grey area between investment and trading.

Peregrinus

SW1985 wrote: »

Sorry if this has already been covered. I've mainly invested in Altcoins. To do this I've had to convert fiat to BTC or ETH and then exchange those for my chosen altcoins. I've then held the altcoins and made profits from them. How does my taxation work in this case?

In order to cash out I'll have to convert back to BTC/ETH. And then from BTC/ETH to fiat. The CGT will apply to the trade from altcoins back to say BTC? Then I'll be able to convert BTC to fiat without being taxed again?

When acquiring, you'll buy a bunch of (say) BTC and then immediately swap them for Altcoins. Since you'll be acquiring and disposing of the BTC at the same value, there'll be no gain and no loss on the disposal. On the same day you'll acquire the Altcoins, and your acquisition cost will be either the euro amount you paid for the BTC plus any transaction costs that you have incurred, or the euro value of the BTC, plus any transaction costs you have incurred - these should be the same figure, or as near as makes no difference.

At the other end, when you dispose of the Altcoin you'll get a bunch of BTC, and your gain on on disposing of the Altcoin will be calculated by reference to the acquisition cost of the Altcoin and the value of the BTC you receive.

At this point you can do one of two things:

You can immediately sell the BTC for cash. This is a second disposal, but there should be no gain, no loss, since you will presumably acquire and dispose of the BTC at the same value.

Or, you can simply sit on the BTC, in which case there is no disposal, and so no liability to CGT. When you later dispose of the BTC you may make a gain or a loss, depending on whether the BTC has appreciated or depreciated since you acquired it. If there's a gain there'll be CGT.

With very volatile currencies it's possible that, even if you acquire and dispose of them as soon as you can, there'll be a gain or a loss. I imagine that in these circumstances the Revenue will be amenable to looking through the transaction, and allowing you to calculate your gain/loss by aggregating the effect of the Altcoin-BTC and BTC-fiat transactions and treating them as one Altcoin-fiat transaction. But if you choose to hold the BTC for even a short time then it becomes a separate investment, and the two disposals (of Altcoin, and of BTC) will be treated as separate events.

As long as the disposals all happen in the same year, of course, not much turns on this, because in any event you will be aggregating all your capital gains, subtracting your small gains exemption and subtracting all your capital losses, to arrive at your net chargeable gain before calculating your tax, so it all comes out in the wash.

boardie100

Peregrinus wrote: »

When acquiring, you'll buy a bunch of (say) BTC and then immediately swap them for Altcoins. Since you'll be acquiring and disposing of the BTC at the same value, there'll be no gain and no loss on the disposal. On the same day you'll acquire the Altcoins, and your acquisition cost will be either the euro amount you paid for the BTC plus any transaction costs that you have incurred, or the euro value of the BTC, plus any transaction costs you have incurred - these should be the same figure, or as near as makes no difference.

At the other end, when you dispose of the Altcoin you'll get a bunch of BTC, and your gain on on disposing of the Altcoin will be calculated by reference to the acquisition cost of the Altcoin and the value of the BTC you receive.

At this point you can do one of two things:

You can immediately sell the BTC for cash. This is a second disposal, but there should be no gain, no loss, since you will presumably acquire and dispose of the BTC at the same value.

Or, you can simply sit on the BTC, in which case there is no disposal, and so no liability to CGT. When you later dispose of the BTC you may make a gain or a loss, depending on whether the BTC has appreciated or depreciated since you acquired it. If there's a gain there'll be CGT.

With very volatile currencies it's possible that, even if you acquire and dispose of them as soon as you can, there'll be a gain or a loss. I imagine that in these circumstances the Revenue will be amenable to looking through the transaction, and allowing you to calculate your gain/loss by aggregating the effect of the Altcoin-BTC and BTC-fiat transactions and treating them as one Altcoin-fiat transaction. But if you choose to hold the BTC for even a short time then it becomes a separate investment, and the two disposals (of Altcoin, and of BTC) will be treated as separate events.

As long as the disposals all happen in the same year, of course, not much turns on this, because in any event you will be aggregating all your capital gains, subtracting your small gains exemption and subtracting all your capital losses, to arrive at your net chargeable gain before calculating your tax, so it all comes out in the wash.

good explanation, good to have a couple of people from revenue explain this

SW1985

Peregrinus wrote: »

When acquiring, you'll buy a bunch of (say) BTC and then immediately swap them for Altcoins. Since you'll be acquiring and disposing of the BTC at the same value, there'll be no gain and no loss on the disposal. On the same day you'll acquire the Altcoins, and your acquisition cost will be either the euro amount you paid for the BTC plus any transaction costs that you have incurred, or the euro value of the BTC, plus any transaction costs you have incurred - these should be the same figure, or as near as makes no difference.

At the other end, when you dispose of the Altcoin you'll get a bunch of BTC, and your gain on on disposing of the Altcoin will be calculated by reference to the acquisition cost of the Altcoin and the value of the BTC you receive.

At this point you can do one of two things:

You can immediately sell the BTC for cash. This is a second disposal, but there should be no gain, no loss, since you will presumably acquire and dispose of the BTC at the same value.

Or, you can simply sit on the BTC, in which case there is no disposal, and so no liability to CGT. When you later dispose of the BTC you may make a gain or a loss, depending on whether the BTC has appreciated or depreciated since you acquired it. If there's a gain there'll be CGT.

With very volatile currencies it's possible that, even if you acquire and dispose of them as soon as you can, there'll be a gain or a loss. I imagine that in these circumstances the Revenue will be amenable to looking through the transaction, and allowing you to calculate your gain/loss by aggregating the effect of the Altcoin-BTC and BTC-fiat transactions and treating them as one Altcoin-fiat transaction. But if you choose to hold the BTC for even a short time then it becomes a separate investment, and the two disposals (of Altcoin, and of BTC) will be treated as separate events.

As long as the disposals all happen in the same year, of course, not much turns on this, because in any event you will be aggregating all your capital gains, subtracting your small gains exemption and subtracting all your capital losses, to arrive at your net chargeable gain before calculating your tax, so it all comes out in the wash.

Thanks very much for this. I felt this was the case but it's very helpful to have it explained.

sublime1

Today on Reddit, there was an excellent post by a US tax advisor that really helps to break down the complexities of tax liabilities on crypto to crypto, fork and mining. Well worth the read, and again a reminder that all is not what it seems in the crypto world. I'm sure much of this will be applicable to the Irish system too.

GreeBo

sublime1 wrote: »

Today on Reddit, there was an excellent post by a US tax advisor that really helps to break down the complexities of tax liabilities on crypto to crypto, fork and mining. Well worth the read, and again a reminder that all is not what it seems in the crypto world. I'm sure much of this will be applicable to the Irish system too.

Did you read the link?

It's literally agreeing with everything I and other have been saying for weeks!

Fundamentally, the IRS treats crypto not as money, but as an asset (investment). While there are a few specific "twists" when it comes to crypto, when in doubt replace the word "crypto" with the word "stock" and you will get a pretty good idea how you should report and pay tax on crypto.

Short term gains are taxed at your marginal income rate

This means that if you do trade your crypto for "stuff", you have to report every exchange as a sale of your crypto and calculate the gain/loss on that sale, just as if you had sold the crypto for cash.

However, one thing that surprises many people is that trading crypto for crypto is also a taxable event, just like trading crypto for a car. Whether you agree with this position or not, it makes a lot of sense once you realize that the IRS doesn't view crypto as money, but instead as an asset

"forks" to create a new crypto also very likely generate a taxable event

However, concerning reporting every transaction - yes, sorry, it is clear that you have to do this, even if you made hundreds or thousands of them

sublime1

The main reason I posted the article was in particular for his discussion on coming up with a valuation for forks, and the intricacies thereof. As he says himself, the area around forks is the most up for debate.
I didn't see any instance of that type of nuance of discussion here, I'm afraid. I understand you and others here are trying to be helpful, but by closing down debate, I'm not sure how helpful you really are.

GreeBo

sublime1 wrote: »

The main reason I posted the article was in particular for his discussion on coming up with a valuation for forks, and the intricacies thereof. As he says himself, the area around forks is the most up for debate.
I didn't see any instance of that type of nuance of discussion here, I'm afraid. I understand you and others here are trying to be helpful, but by closing down debate, I'm not sure how helpful you really are.

I already said a fork or airdrop is essentially a gift for CGT purposes.
Initial value is the value as at the time you received them.

If you have some specific nuanced question go ahead and ask it?

The issue is the you are trying to debate the facts of tax. If you want to argue about it, talk to revenue, but disagreeing with the facts I and others are presenting is not useful. It's confusing for others.

This is perpetuating the idea that maybe people don't need to pay tax on crypto gains because they are somehow different or immune.

This is 100% incorrect.

As I quoted from your article, if in doubt treat them as stocks, don't ignore and hope it magically goes away.

ZeroThreat

sublime1 wrote: »

The main reason I posted the article was in particular for his discussion on coming up with a valuation for forks, and the intricacies thereof. As he says himself, the area around forks is the most up for debate.
I didn't see any instance of that type of nuance of discussion here, I'm afraid. I understand you and others here are trying to be helpful, but by closing down debate, I'm not sure how helpful you really are.

With regard to ICOs, you often pay ethereum and receive erc 20 tokens in return. Since you're essentially getting a new crypto in exchange for the ETH, will the taxable event occur as soon as you receive the tokens (but they're not listed on any exchange yet)? Or will it just occur when you sell/exchange them for something else further down the line?

If it's the first one, then what should the tokens be valued at since they're often non-transferrable for some time and can't be traded on exchanges and hence have no defined market value when you receive them initially?

Dades

Re Airdrops, I don't mean to confuse things further - but aren't "gifts" only dealt with under CAT?

ZeroThreat

GreeBo wrote: »

I already said a fork or airdrop is essentially a gift for CGT purposes.
Initial value is the value as at the time you received them.

If you have some specific nuanced question go ahead and ask it?

The issue is the you are trying to debate the facts of tax. If you want to argue about it, talk to revenue, but disagreeing with the facts I and others are presenting is not useful. It's confusing for others.

This is perpetuating the idea that maybe people don't need to pay tax on crypto gains because they are somehow different or immune.

This is 100% incorrect.

As I quoted from your article, if in doubt treat them as stocks, don't ignore and hope it magically goes away.

The problem is that many people involved in crypto have never been involved with stocks and aren't from the accounting/trading/banking world like your good self. There's probably many in this country trading cryptos who don't even know this forum exists.

ZeroThreat

Dades wrote: »

Re Airdrops, I don't mean to confuse things further - but aren't "gifts" only dealt with under CAT?

In any event, CAT is also at the 33% rate.

Dades

ZeroThreat wrote: »

In any event, CAT is also at the 33% rate.

That may be, but it doesn't help an already complicated tax return if you need to make CAT declarations on top of everything else.

GreeBo

Dades wrote: »

That may be, but it doesn't help an already complicated tax return if you need to make CAT declarations on top of everything else.

Revenue wont come after you becuase you filed airdrops/forks/etc as CGT rather than CAT. If they do happen to discover it, you wont get fined either.

ZeroThreat wrote: »

The problem is that many people involved in crypto have never been involved with stocks and aren't from the accounting/trading/banking world like your good self. There's probably many in this country trading cryptos who don't even know this forum exists.

Which is why allowing the constant "sure I dont think I need to pay, its mad complicated" argument to fester is a bad thing.
There is ZERO doubt that CGT is due on any crypto gains and its due as soon as you dispose of them.

ZeroThreat wrote: »

With regard to ICOs, you often pay ethereum and receive erc 20 tokens in return. Since you're essentially getting a new crypto in exchange for the ETH, will the taxable event occur as soon as you receive the tokens (but they're not listed on any exchange yet)? Or will it just occur when you sell/exchange them for something else further down the line?

If it's the first one, then what should the tokens be valued at since they're often non-transferrable for some time and can't be traded on exchanges and hence have no defined market value when you receive them initially?

There are multiple taxable events
1) When you dispose of the ETH for tokens. your ETH is either worth more or less than when you bought it.
2) When you dispose of the tokens, they are worth more or less than when you bought them.

The value of the tokens is the price you paid for them in this case.
20ETH worth of tokens is worth 20ETH the same as if you bought €20 worth. Thats the market price for them so its the market value. Just because *you* cant sell them for that doesnt mean they have no value. (If they had no value, why did you buy them )

Admittedly it might get a little fuzzy around valuing the tokens once they hit the exchange, but they will have a market so they will have a price that you can compare to what you paid for them (unless the original currency is no longer around)

ZeroThreat

ZeroThreat wrote: »

In any event, CAT is also at the 33% rate.

It also has a 3k per year tax free exemption per donor, big difference compared to CGT. Now how will that be interpreted here for instance you should be able to get 3k tax free from each different airdrop etc.

GreeBo

Angel Dead Apartment wrote: »

It also has a 3k per year tax free exemption per donor, big difference compared to CGT. Now how will that be interpreted here for instance you should be able to get 3k tax free from each different airdrop etc.

Actually, since you (mostly!) dont get this stuff for free (using a form as an example) its a gain realised from having an asset
e.g. you get BCH because you had BTC, they might just look at it as plain old CGT.

Now the random coins that you get for signing up (XLM for example) would be CAT in my mind.

ZeroThreat

GreeBo wrote: »

Revenue wont come after you becuase you filed airdrops/forks/etc as CGT rather than CAT. If they do happen to discover it, you wont get fined either.


Which is why allowing the constant "sure I dont think I need to pay, its mad complicated" argument to fester is a bad thing.
There is ZERO doubt that CGT is due on any crypto gains and its due as soon as you dispose of them.


There are multiple taxable events
1) When you dispose of the ETH for tokens. your ETH is either worth more or less than when you bought it.
2) When you dispose of the tokens, they are worth more or less than when you bought them.

The value of the tokens is the price you paid for them in this case.
20ETH worth of tokens is worth 20ETH the same as if you bought €20 worth. Thats the market price for them so its the market value. Just because *you* cant sell them for that doesnt mean they have no value. (If they had no value, why did you buy them )

Admittedly it might get a little fuzzy around valuing the tokens once they hit the exchange, but they will have a market so they will have a price that you can compare to what you paid for them (unless the original currency is no longer around)

hmmm that makes it a little less complicated for me then, I literally bought ethereum to buy ICO tokens all within the space of 30 mins or so. Wasn't really any price fluctuations with eth going on at that time so I'd regard acquisition and disposal price of eth to be the same. Tokens are released next week so no tax event for that (yet) since I'll be hanging onto them.

Benzino

Thanks to everybody who has contributed to this thread, very informative. Wish I had discovered it sooner, didn’t realise I had to pay before 15th Dec and now the 31st of Jan, just assumed it was the usual 31st of October. Now I have to go back and see if I made any profit between October and December and pay the fines.

AlmightyCushion

GreeBo wrote: »

Actually, since you (mostly!) dont get this stuff for free (using a form as an example) its a gain realised from having an asset
e.g. you get BCH because you had BTC, they might just look at it as plain old CGT.

Now the random coins that you get for signing up (XLM for example) would be CAT in my mind.

It would be CAT for the initial receiving of the coins but after that, if you decided to dispose of them at any stage it would be CGT, right?

GreeBo

AlmightyCushion wrote: »

It would be CAT for the initial receiving of the coins but after that, if you decided to dispose of them at any stage it would be CGT, right?

Subsequent disposal would deffo be CGT, I'm not 100% if crypto received as part of a fork would be CAT or regular CGT.

In a way a fork is just your portfolio value increasing as you only get new coins based on having existing pre-fork coins. (As opposed to the free XLM from a while back)

One could also argue that its similar to a dividend...but I wouldnt put much stock in revenue holding that viewpoint.

Fakent.ie

wait are we meant to pay CGT at the end of the year every year or when we swap back to fiat?

AlmightyCushion

Fakent.ie wrote: »

wait are we meant to pay CGT at the end of the year every year or when we swap back to fiat?

Only if you have a disposal in that year. A disposal mean selling some of your coin or trading some of your coin for another coin.