Capital gains taxes on cryptocurrencies Ireland

pliauskiux

Hi,

Is anyone here that has paid capital gains taxes on cryptocurrencies?

I've put in some money into cryptocurrencies at the end of 2017 and at the beginning of 2018. I've invested into multiple coins, bought 1 coin, used it to buy other coins etc. How does one go about pay taxes on these things?

1. I assume I will have to submit a late tax return as I have started investing in 2017?

2. If I'm looking to cash out some money between now and the end of the year, I assume it would be smartest to file CGT before the income gets flagged by the bank or is it fine to cash it out as long as I have the CGT filed at the end of the year?

3. My way of calculating taxes would be:
Invested 2000 euro that has now turned into 10000 euro.
10000 - 2000 = 8000 (subtract money invested).
8000 - 1270 = 6730 (subtract exemptions - https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/cgt-exemptions.aspx)
33% of 6730 = 2220.9 = taxes to pay
10000 - 2220.9 = 7779.1 = take home
Is this correct?

4. If I have to submit CGT now, how do I go about making changes to it (when does it need to be done?) if I get more coins?

Thanks in advance to anyone with some information on this!

Mario852

pliauskiux wrote: »

Hi,

Is anyone here that has paid capital gains taxes on cryptocurrencies?

I've put in some money into cryptocurrencies at the end of 2017 and at the beginning of 2018. I've invested into multiple coins, bought 1 coin, used it to buy other coins etc. How does one go about pay taxes on these things?

1. I assume I will have to submit a late tax return as I have started investing in 2017?

2. If I'm looking to cash out some money between now and the end of the year, I assume it would be smartest to file CGT before the income gets flagged by the bank or is it fine to cash it out as long as I have the CGT filed at the end of the year?

3. My way of calculating taxes would be:
Invested 2000 euro that has now turned into 10000 euro.
10000 - 2000 = 8000 (subtract money invested).
8000 - 1270 = 6730 (subtract exemptions - https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/cgt-exemptions.aspx)
33% of 6730 = 2220.9 = taxes to pay
10000 - 2220.9 = 7779.1 = take home
Is this correct?

4. If I have to submit CGT now, how do I go about making changes to it (when does it need to be done?) if I get more coins?

Thanks in advance to anyone with some information on this!

I would also love to know the answer to these, particularly if every crypto to crypto trade has to be accounted for individually or is lumping them into a sum like pliauskiux did a valid option.

Geuze

Note that CGT becomes liable when you dispose of the asset.

I own shares that have gone from 4 to 16.

But I don't owe any CGT as I have not sold them.

Geuze

https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/index.aspx

Lockedout2

pliauskiux wrote: »

Hi,

Is anyone here that has paid capital gains taxes on cryptocurrencies?

I've put in some money into cryptocurrencies at the end of 2017 and at the beginning of 2018. I've invested into multiple coins, bought 1 coin, used it to buy other coins etc. How does one go about pay taxes on these things?

1. I assume I will have to submit a late tax return as I have started investing in 2017?

2. If I'm looking to cash out some money between now and the end of the year, I assume it would be smartest to file CGT before the income gets flagged by the bank or is it fine to cash it out as long as I have the CGT filed at the end of the year?

3. My way of calculating taxes would be:
Invested 2000 euro that has now turned into 10000 euro.
10000 - 2000 = 8000 (subtract money invested).
8000 - 1270 = 6730 (subtract exemptions - https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/cgt-exemptions.aspx)
33% of 6730 = 2220.9 = taxes to pay
10000 - 2220.9 = 7779.1 = take home
Is this correct?

4. If I have to submit CGT now, how do I go about making changes to it (when does it need to be done?) if I get more coins?

Thanks in advance to anyone with some information on this!

You pay CGT when you dispose of an asset.

1. You have to file a 2017 return if you sold an asset in 2017.

2. You file the return for 2018 in 2019 but have to pay the tax in December.

3. When you sell the asset for €10,000 you trigger the CGT event.

4. You compute the profits and losses for each year and submit the return as the transactions have already happened there should be no need to change the return.

The sale of one coin is a CGT event so if you use COINA to buy COINB the effective sale of COINA should be translated into Euros and compare with the Euro cost and the profit/loss compared for that asset.

Nika Bolokov

Lockedout2 wrote: »

You pay CGT when you dispose of an asset.

1. You have to file a 2017 return if you sold an asset in 2017.

2. You file the return for 2018 in 2019 but have to pay the tax in December.

3. When you sell the asset for €10,000 you trigger the CGT event.

4. You compute the profits and losses for each year and submit the return as the transactions have already happened there should be no need to change the return.

The sale of one coin is a CGT event so if you use COINA to buy COINB the effective sale of COINA should be translated into Euros and compare with the Euro cost and the profit/loss compared for that asset.

The sale of coin a for coin b is not an event unless coin a is changed into euro at one point. Swapping them for hypothetical values on exchanges doesn't count.

Actually getting euro from a sale of some of these can be hard.

Pawwed Rig

Gains between Jan and Nov need the tax to be paid by 15 Dec. Gains made in Dec need the tax paid by 31 Jan.
There is no need to pay everytime you do a transaction.
Losses can only be carried fwd and not back - this will be very relevant based on my understanding of crypto currencies.

Well done on the 8K gain.

Marcusm

Nika Bolokov wrote: »

The sale of coin a for coin b is not an event unless coin a is changed into euro at one point. Swapping them for hypothetical values on exchanges doesn't count.

Actually getting euro from a sale of some of these can be hard.

Pawwed Rig wrote: »

Gains between Jan and Nov need the tax to be paid by 15 Dec. Gains made in Dec need the tax paid by 31 Jan.
There is no need to pay everytime you do a transaction.
Losses can only be carried fwd and not back - this will be very relevant based on my understanding of crypto currencies.

Well done on the 8K gain.

Both of these statements are incorrect; the exchange of one crypto currency for another (or indeed the exchange of any asset for another with limited excepts) is a disposal for CGT purposes and the gain or loss accrues at that point.

Pawwed Rig

Marcusm wrote: »

the exchange of one crypto currency for another (or indeed the exchange of any asset for another with limited excepts) is a disposal for CGT purposes and the gain or loss accrues at that point.

That is correct. I did not say otherwise

Marcusm

Pawwed Rig wrote: »

That is correct. I did not say otherwise

Having read Nika Bolokov’s statements, I think I inferred your “there is no need to pay every time you do a transaction.” As backing up hue erroneous statements. Apologies for the confusion.

pliauskiux

This is starting to make a lot of sense, thanks guys!

One more thing that I'm trying to figure out is:

Assuming my investment is 2000 euro that I have invested at the end of 2017.

In June 2018, my investment has turned into 23000 euro. I want to sell some of my coins to cash out 7000 euro.

At which point should I be filing the CGT? Does it need to be done in December? Will I have revenue guys calling me in July because they found out I have an extra 7k that's been deposited into my bank account?

How would I go about calculating the taxes? Were my calculations correct above? Assuming I've invested 2000e in December of 2017 that has now turned into 23000e and I want to cash out 7000e.

Thanks!

Peregrinus

pliauskiux wrote: »

This is starting to make a lot of sense, thanks guys!

One more thing that I'm trying to figure out is:

Assuming my investment is 2000 euro that I have invested at the end of 2017.

In June 2018, my investment has turned into 23000 euro. I want to sell some of my coins to cash out 7000 euro.

At which point should I be filing the CGT? Does it need to be done in December? Will I have revenue guys calling me in July because they found out I have an extra 7k that's been deposited into my bank account?

How would I go about calculating the taxes? Were my calculations correct above? Assuming I've invested 2000e in December of 2017 that has now turned into 23000e and I want to cash out 7000e.

Thanks!

Let's keep it simple. Assume that your investment was a single purchase of a holding of just one cryptocurrency - say 1000 coins at €2 each. In June 2018 you still have the same holding, but the coin price has risen to €23.

You want to cash out about €7,000. You sell, say, 304 coins at €23 each - sale proceeds €6,993. The acquisition cost of those coins at €2 each was €608, so your gain is €(6,993 - 608 €6,385. Let's pretend there are no transaction costs associated with either the purchase or the sale. (If there were, at this point you would deduct them from the figure of €6,385.) Assume you have no other capital gains for the year, so your small gains exemption is available to you; you deduct €1,270, leaving €5,115. Assume that you have no capital losses (arising from other, less fortunate investment transactions) that you can deduct. So your net chargeable gain is €5,115.

CGT on €5,115 at 33% is €1,687.95.

This amount is due and payable by 15 December. The Revenue will not be bothering you (at least, over this matter) before that date.

You still hold 696 coins out of your original holding with an acquisition cost of $2 each. As and when you dispose of them, you can repeat this calculation to determine what (if any) CGT liablity will be triggered by the sale.

pliauskiux

Peregrinus wrote: »

Let's keep it simple. Assume that your investment was a single purchase of a holding of just one cryptocurrency - say 1000 coins at €2 each. In June 2018 you still have the same holding, but the coin price has risen to €23.

You want to cash out about €7,000. You sell, say, 304 coins at €23 each - sale proceeds €6,993. The acquisition cost of those coins at €2 each was €608, so your gain is €(6,993 - 608 €6,385. Let's pretend there are no transaction costs associated with either the purchase or the sale. (If there were, at this point you would deduct them from the figure of €6,385.) Assume you have no other capital gains for the year, so your small gains exemption is available to you; you deduct €1,270, leaving €5,115. Assume that you have no capital losses (arising from other, less fortunate investment transactions) that you can deduct. So your net chargeable gain is €5,115.

CGT on €5,115 at 33% is €1,687.95.

This amount is due and payable by 15 December. The Revenue will not be bothering you (at least, over this matter) before that date.

You still hold 696 coins out of your original holding with an acquisition cost of $2 each. As and when you dispose of them, you can repeat this calculation to determine what (if any) CGT liablity will be triggered by the sale.

This is making a lot more sense now, thank you!

There's still a lot of unknowns that I will probably have to learn about when filing the CGT but it's definitely gonna help me and other folks get their heads around this.

davberd

Lockedout2 wrote: »

The sale of one coin is a CGT event so if you use COINA to buy COINB the effective sale of COINA should be translated into Euros and compare with the Euro cost and the profit/loss compared for that asset.

Can anyone provide some information confirming the above? Looking myself online it is not entirely clear. Neither is it clear how the translating into Euro would work in practice.

For example, I have moved coins from one exchange to another exchange where they don't trade in fiat. So if I move coinA from coinbase, for example, to a non-fiat exchange and directly trade coinA for coinB, are we sure that a CGT event has taken place? If so, who/what becomes the definitive source of price information? (The no-fiat exchange can't be used to determine the fiat prices of the coins.)

Peregrinus

davberd wrote: »

Can anyone provide some information confirming the above? Looking myself online it is not entirely clear. Neither is it clear how the translating into Euro would work in practice.

For example, I have moved coins from one exchange to another exchange where they don't trade in fiat. So if I move coinA from coinbase, for example, to a non-fiat exchange and directly trade coinA for coinB, are we sure that a CGT event has taken place? If so, who/what becomes the definitive source of price information? (The no-fiat exchange can't be used to determine the fiat prices of the coins.)

There's a lengthy and somewhat heated discussion of the topic over here, but the dominant opinion is yes, if you exchange CoinA for CoinB that's a disposal of CoinA, with the usual CGT consequences. The last holdouts for the contrary opinion seem to have been swayed by this post, in which someone reports having got confirmation from the Revenue that, yes, exchange of coins is a disposal for CGT purposes.

As for the valuation problem, this isn't really a novel problem; the world already contains other hard-to-value assets - e.g. shares in private companies. Valuing cryptocurrency is a piece of cake compared to those, to be honest. The value of your crypto isn't limited by the nature or rules of the particular exchange that you choose to trade it on. You know how many CoinB you got in exchange for your holding of CoinA. If the trade was executed on on an exchange that doesn't handle fiat dealings, then just check out the value of CoinB on exchanges that do handle fiat dealings. Your CoinB is the same coin as the CoinB traded on those exchanges; it will have the same value.

I get that crypto can be highly volatile, so that if you look to other exchanges what you will actually get is a range of values for CoinB for transactions that occurred at around the same time as yours. Again, this isn't a novel problem. The Revenue will be pragmatic about this, accepting any reasonable approach, such as using the mid-point of the published range of values for the day, or an average across several exchanges, or whatever, so long as you use that approach consistently for all your transactions. You can't pick and choose your valuation method separately for each transaction in order to produce the best tax outcome for yourself.

davberd

@Peregrinus - thanks very much for the info and links. It's not exactly what I wanted to hear but at least I have an idea of the (complicated) task ahead. I should have just hodled