Crypto tax situation - Read post 1 for thread banned users

massdebater

https://www.boards.ie/discussion/comment/117708318#Comment_117708318

What country did you move to?

Imagine if blockchain tech was used to record all government spending, I doubt these money-pit hospitals would cost so much. The transparency would be good for a lot of charity organisations too

Peregrinus

Crypto-to-crypto exchanges are treated exactly the same as share-to-share exchanges or, for that matter, foreign fiat-to-foreign fiat exchanges. Why wouldn't they be?

I am constantly amazed at the sense of entitlement exhibited by crypto fans who are outraged — outraged, I tell you! — that crypto doesn't get special tax breaks that they take it for granted are deserved for reasons that they never bother to tell you.

RulesOfNature

https://www.boards.ie/discussion/comment/117708334#Comment_117708334

You literally just said the reason in your first sentence. Crypto should NOT be treated like traditional assets because its NOT. It is not regulated by any central banks and it does NOT need fiat as a medium to trade between different assets. It only touches fiat when you cash out and that should be the only time its taxable.

Did you even read how your post contradicted itself in 3 sentences or less?

You honestly think FF/FG should get 33% of someone’s entire portfolio if they decided to swap out between two assets UNREGULATED by the government?

People are absolutely deranged. At this point its just fetishizing people not amassing wealth. The worst part is, it benefits no one (except the cronies in power) and everyone individually would be better off if this was reformed. Except crab-in-a-buckets would rather everyone get taxed to death than change the system for the better. And hence I take my 5 million elsewhere.

Bob24

You could say the same thing about gold, fine art or whatever.

I can buy a painting off someone with gold coins and never touch fiat currency. Should that exempt the transaction from CGT? Of course not and this is no different from someone swapping BTC for ETH.

RulesOfNature

https://www.boards.ie/discussion/comment/117711026#Comment_117711026

Did you really just say that a highly regulated asset (gold) being swapped for art (another regulated asset but with many loopholes) should be the same as clicking a few buttons to swap between math equations with no central governing body, like ERC20 and BTC?

So is everyone here literally 40+ years old and have literally not a single idea of what these words even mean?

Here's an idea: I will swap you 1,000,000 rocks for 2,000 of your rocks. Nobody regulates these rocks, and they're all my property and your property. Should the government step in, make an imaginary number and say 33% of those rocks value in Euros should be mine, even though not a single one of you have made any profit?

The fact of the matter is: The Central Bank does not regulate cryptocurrency. They have no jurisdiction over it. They have authority over the fiat it cashes out to, but if I wanna swap my ETH for BTC for DOGE for SHIBE for whatever the f*ck without ever touching fiat then the government should mind its own business.

It's time to be honest here. These outdated tax laws does not benefit the individual at any level. Any denial of this is pure masochistic delusion, or shilling by a government worker.

And hence, I take my capital elsewhere.

Bob24

It is irrelevant how assets are regulated or not by the central bank (you were arguing that there should be no CGT on crypto when it is traded without going back to fiat, I gave you an exemple of trade with other asset classes whereby there is no fiat involved either and CGT is still due). Capital gains are taxed no matter what and this is the case in most countries (of course there can be exceptions or special rules for certain assets but 33% CGT is the generic rule).

It is very fine if some countries decide not to have CGT at all or to have CGT exemptions for some asset classes, and you are welcome to move there. I would also agree our CGT rate is too high and certainly this can be discussed.

But it doesn’t justify why Ireland should treat crypto differently from other asset classes.

Anyway, if people disagree with you it must be because they don’t understand crypto or because they are too old (ah the stupid old people and their useless experience ;-)).

Peregrinus

I am genuinely puzzled as to why anybody would think that the question of how gains should be taxed is in any way related to the question of how assets are regulated. This makes no sense at all to me, and reflects nothing in the real world. Income tax rates do not depend on whether or how much your trade or professsion is regulated; VAT rates do not depend on whether the good and services being sold are highly regulated, lightly regulated or wholly unregulated. Why in God's name would anybody think that capital gains tax rates should depend on whether and how much the assets being acquired and disposed of are regulated? It's bizarre.

deadduck

Apologies if this was asked already, but regarding CGT between spouses, if my wife sets up an exchange account on, say, Kraken, and I send her some crypto, anything she cashes out up to her CGT exemption of €1270 is tax free?

To be clear, we are jointly assessed for tax, and the crypto was bought with joint income, but is held by me. But from what I’ve read, what I’ve laid out above is the only way to take advantage of both our exemptions?

Peregrinus

That's right.

The transfer has to be a genuine transfer; you're not "putting the crypto in her name" for her to hold on your behalf; you are making a gift to her, which means whether she subsequently sells it or not is her decision, not yours, and if she does sell it what she does with the sale proceeds is up to her. But no doubt she will see the advantage of utilising her annual CGT exemption, just as you do.

Tr_18

Do bed and breakfasting rules apply to crypto?

And if so, how does it work?

I want to sell a portion of my crypto and aim to buy back in when/if the price drops? Can this be done within the 4 weeks?

massdebater

https://www.boards.ie/discussion/comment/117727591#Comment_117727591

Would you be locking in a loss or a gain by selling now? And what crypto assets are you trying to do this with? These will make a difference to your options.

If you're trying to lock in a gain, there's no minimum period so you can just sell now and buy back at any time.

If you're trying to lock in a loss now, it'll depend on what assets you're trying to sell. Swapping to a wrapped version counts as a sale so you could, for example, swap BTC --> wBTC, hold wBTC for a month and then swap back to BTC at any stage after that.

Tr_18

https://www.boards.ie/discussion/comment/117729072#Comment_117729072

Thanks for the reply.

I'll be locking in a gain (cash out) on eth so going by your statement, I can sell now and theoretically buy back tomorrow regardless of whether the price goes up or down?

massdebater

https://www.boards.ie/discussion/comment/117731764#Comment_117731764

Yeah I'm pretty sure b+b rules don't apply when you're making a gain in Ireland (only when you're making a loss) - perhaps someone else can confirm that's the case?

floorpie

https://www.boards.ie/discussion/comment/117708334#Comment_117708334

Many people's crypto assets have started at a price near €0 and gone up x00000%. CGT doesn't seem like an appropriate tax for, let's say, a portfolio that is bought for €100 and sold for €10m, given that the "gain" is 99.999% of the total value of the portfolio. Is there any other asset class that has such rates of return, for which CGT is so punitive, or is crypto "special" in this sense?

floorpie

Is there any EU rule or similar that prevents Ireland from having, e.g., 5% CGT on cryptocurrency? I see many crypto mega millionaires online who give up citizenship and seek residency elsewhere for tax purposes. It seems silly to essentially force the wealthiest crypto holders out of a country, in order to get a 33% cut from people with meagre crypto earnings who aren't motivated to leave. Furthermore it seems like a good idea to attract crypto wealth. Does anyone sense that CGT rules around crypto will be revised?

gordongekko

https://www.boards.ie/discussion/comment/117733792#Comment_117733792

Yes we should only tax the poor and let the wealthy into the country and tell them we will tax them differently just because they made money on crypto. Excellent idea 🙄

floorpie

https://www.boards.ie/discussion/comment/117733856#Comment_117733856

? My proposal is that CGT is lowered for cryptocurrency, given that gains are out of line with (I suppose) the types of gain in asset prices that CGT was conceived for. I didn't say to only tax the poor...?

The reason for this proposal is to retain wealth in the country, and furthermore, attract it.

gordongekko

https://www.boards.ie/discussion/comment/117733881#Comment_117733881

Its not out of line with anything!!!!!!

floorpie

https://www.boards.ie/discussion/comment/117734368#Comment_117734368

What other assets have x0000% increases in value in a short space of time, making the gain essentially the same as the value of the asset? I suppose some derivatives could but what else? I imagine CGT wasn't designed with such asset classes in mind? Maybe I'm wrong

Bob24

https://www.boards.ie/discussion/comment/117733856#Comment_117733856

This is pretty much what Ireland does for corporations. We have a low corporate tax rate in the first place and are giving multinational companies even better deals that the baseline rate paid by small local companies

It isn’t a simple black and white issue though. You can say it is morally wrong to give large wealthy corporation such a low rate, but the net effect is that is does increase tax receipts for the government and pays for social spending (as otherwise those companies wouldn’t be here and would therefor pay no tax). A low CGT rate to attract foreign investor would have a similar effect (there might be other factors driving the CGT rate and there is an open discussion to be had on what makes the most sense for the country of course, but thinking that decreasing the rate would necessarily reduce the amount of tax paid would be a big mistake when it comes to this type of tax).

Bob24

https://www.boards.ie/discussion/comment/117734442#Comment_117734442

While I agree that reducing the rate would possibly be a good deal for the taxman if it is being sufficiently reduced to attract foreign wealthy investors and retain more Irish ones, I don’t think the fact that an asset class offers very high returns is a justification to have lower CGT on it.

The goal of CGT is to tax people proportionally to the wealth being created by their capital. If mister normal has become a multi-millionaire thanks to crypto he needs to accept that he is now a big fish and the amount of tax he owes on this massive wealth creation is much higher than what he had been used to. And of course he is welcome to explore tax optimisation strategies and to become a tax resident in another jurisdiction if he thinks the Irish CGT rate and calculation rules are too disadvantageous (I wouldn’t blame him).

floorpie

https://www.boards.ie/discussion/comment/117734630#Comment_117734630

That makes sense

>I don’t think the fact that an asset class offers very high returns is a justification to have lower CGT on it

But this is what makes it non-viable to dispose of crypto in Ireland, in my eyes. E.g. paying CGT on a house that goes from €10k to €1M over 50 years isn't as punitive as paying CGT on a crypto portfolio that goes from €10k to €1M in 6 months.

Re: attracting foreign wealth (or keeping Irish wealth in Ireland)...I watched a recent talk by the ESRI on how to increase tax revenue. In an hour of ideas and then a panel discussion, nobody mentioned any tax reductions in order to increase the take. Crypto is a ~$2T market, largely owned by regular joes, and these people are willing to move wherever to draw it down. Our CGT rules are out of step with this very recent development imo.

jmlad2020

I'm a newbie filling out CGT forms myself for the first time. I have a question.

I get that you pay 33% tax on gains in Ireland.

Do I need to provide any proof of purchase, (statement from exchange/bank statements) + my realised gains workings in a clear format as supplementary evidence?? I'm struggling to find info on the whole process in lay terms

Is there a chance they will come looking for full workings? Thanks.

relax carry on

https://www.boards.ie/discussion/comment/117734956#Comment_117734956

You don't have to provide full workings unless requested. You should have your full workings in order to have paid your CGT. Your return is just to match the CGT paid already.

Peregrinus

https://www.boards.ie/discussion/comment/117734442#Comment_117734442

So? If an asset appreciates very rapidly it should be favoured with lower tax rates?

Are high-paying jobs favoured with lower income tax rates? Does particularly expensive jewellery attract a lower VAT rate?

This - like the earlier argument based on lack of regulation - make no sense at all. Conventionally, tax rates are graduated according to ability to pay; if that principle was applied to CGT then the holders of the best-performing assets would suffer higher rates of CGT, not lower.

And, to a certain extent, this is the case in other countries, where lower CGT rates apply if you have held the asset for longer. So if Irish CGT were designed to afford special treatment to assets that yield enormous gains in a short time frame, it would likely subject them to higher rates, not lower rates.

I'm genuinely astonished at the suggestion that investment in crypto should be tax-favoured. There is zero societal benefit in investment in crypto as compared with, say, investment in businesses that generate activity, employment and wealth, or investment in productive assets. If anything, crypto is socially detrimental, because of the environmental impact.

Invest in crypto if you want. But before you start looking for other taxpayers to support you in that, stop and think how stupid that looks.

gordongekko

https://www.boards.ie/discussion/comment/117734442#Comment_117734442

This is exactly what CGT was designed for.

Peregrinus

What Gordon said. CGT was introduced in Ireland in the 1970s precisely because people were making very large windfall gains in very short time frames through speculative investments, and avoiding tax on those gains because they weren't carrying on a trade or profession. The larger the investment windfall, and the shorter the time-frame in which it accrues, the more bizarre (to most people) is the idea that it should escape tax.

floorpie

https://www.boards.ie/discussion/comment/117736174#Comment_117736174

https://www.boards.ie/discussion/comment/117736013#Comment_117736013

I keep asking the same question: what speculative investments in the 70s, and what order of magnitude of windfall?

You guys aren't getting my point here so I suppose I'm not being clear. I don't mean that people whose wealth rockets should be let off CGT just because of the short time frame or magnitude per se.

The rate of increases in value of crypto are such that, in a very short amount of time, with no access to finance or leverage or financial instruments required, it becomes prudent to leave the country. If you start with €1000 and end up with crypto worth €10m after a year or two, it's completely senseless to draw this down in Ireland.

Secondly, the nature of crypto means that leaving the country is trivially achieved. This is already happening, people are already moving, and other countries are already incentivising people coming.

CGT in Ireland is anachronistic in the face of this RECENT DEVELOPMENT and I think it's silly that you're both trying to pretend that CGT, conceived of initially as a replacement for estate duty and which at the time mainly existed to tax the sale of land and property, is appropriate for assets that you can't be compelled to disclose, and you can "take" wherever you like without notification, and can transfer internationally in seconds without any intermediaries. Again, please cite just ONE comparable asset in terms of value, transferability, and liquidity.

So this gap in taxation (in my eyes) is non optimal for both stimulating/attracting investment, in terms of overall tax revenue, and makes the country non-competitive in the face of a massive change in the landscape of finance/tech. I've no doubt that it'll have to change, my initial question in the thread was just "when".

floorpie

https://www.boards.ie/discussion/comment/117735912#Comment_117735912

You think that there's zero societal benefit to crypto, with regard to activity, employment and wealth?

Peregrinus

CGT was not conceived of as replacement for estate duty; you're thinking of CAT, a completely different tax.

The investments in the 70s were property investments. There were a number of cases of people buying up derelict properties, sitting on them during a property boom and then selling them for multiples of what they had paid, without having done any work at all; simply allowing them to deteriorate. The case that caught the public imagination, if I remember correctly, was a bank - was it AIB? - that bought up a collection of city centre properties with a view to constructing a corporate headquarters, later changed its mind and bought up abandoned cattle yards in Ballsbridge and put the headquarters there, sold off the city centre property for a stupendous gain, and avoided paying any tax on the basis that the property transactions were not undertaken in the course of their banking business. There was general public outrage that windfall gains accruing to a bank as a result simply of rom owning something at a time of rising prices would go untaxed, so CGT was introduced.

As for the incentive to leave the country: if you have a gain of €10m, the CGT on that is exactly the same regardless of whether your initial stake was €1, €1m, €10m or even €100m, and regardless of whether the gain accrued over one month, one year or ten years — it's €3.3m. It's also the same regardless of the nature of the asset; the CGT rate for gains on crypto is the same as the CGT rate for gains on fiat (which, since you ask, is comparable or superior to crypto in terms of value, transferabiilty and liquidity), gains on shares, gains on pretty well anything. You either do or do not consider that it's worth your while to uproot your life in order to save €3.3m — it's up to you. But the potential tax saving is the same regardless of how much you staked initially or how long you held the asset or (mostly) the nature of the asset you are selling; none of these considerations enter into your emigration calculation at all. Mentioning them in this context is a giant red herring.

Which means that, whatever incentive CGT creates for people to leave the country, it has always created. That has been a feature of the tax since it was introduced. If you have accrued a gain on a financial asset, it has always been possible to avoid CGT on it by moving to e.g. Portugal and becoming neither resident nor ordinarily resident in Ireland before you dispose of it. Crypto changes nothing there. Possibly with the crypto boom there are currently more people with larger gains who experience this incentive, but on the the other hand the opportunity cost to the exchequer from not taxing the gains is correspondingly greater, so I reckon that's a wash, from a public policy point of view.

I'm not sure why you think CGT in Ireland is anachronistic in this respect; as pointed out, the issue you identify is not new, and it's hardly unique to Ireland. Irish CGT, in taxing gains on crypto in exactly the same way as gains on other assets, is not unusual; SFAIK this is the international norm. If people are leaving Ireland to avoid CGT on their crypto gains, they are not relocating to countries that have special deals for crypto; they are relocating to countries that have low or no CGT in general.