Crypto tax situation - Read post 1 for thread banned users

floorpie

https://www.boards.ie/discussion/comment/117736731#Comment_117736731

Thanks.

I understand what you mean, that it's taxed the same as every other asset, a gain of €10m is a gain of €10m, that the rules are common in many countries, and so on. The difference I see is that very few laypeople (mobile and tech savvy, at that) will have had such gains with any other asset in the past ever. So this...

"Which means that, whatever incentive CGT creates for people to leave the country, it has always created."

...is not true. The considerations of someone sitting on a bank HQ, or business person who establishes a business over 20 years say, who could take up tax residency elsewhere, are different to those of a 21 year old who blindly put a few grand into crypto a few years ago and is now a multimillionaire without lifting a finger. I understand that the flat rate of CGT applies to all, but it creates different incentives in different situations.

You say a few times that this is "not new" but I see no evidence of this. Even just looking at breakdown of CGT revenue here for the last few years, crypto seems "new". In 2019, €9B worth of disposed assets were taxable through CGT, most of it land/property/unquoted securities, resulting in about €1B revenue from CGT. €13T was traded on crypto exchanges last year. I would not be surprised if the amount traded by Irish people dwarfed all assets under consideration for CGT otherwise.

"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"

That's probably true

Bob24

https://www.boards.ie/discussion/comment/117736731#Comment_117736731

On the fact that the incentive to leave the country because of CGT has always existed since the tax was introduced. Technically yes, but it has to be said that every time the rate was increased, that incentive was also increased.

At this point, Ireland clearly is a high CGT country in a European context (and thus in a global context as Europe tends to have the highest rates). If this is what the majority of Irish people think is the right thing to do this is fine, but we have to be clear on the fact that our system is rather punitive (not just the rate, but also the low yearly exemption, the deemed disposal rule, the the lack of tax-incentivised investment accounts for small/medium individual investors such as ISA in the UK or PEA in France, etc).

PS: is there still a way to only quote and outline a small section of a post instead of quoting the whole thing? (I might be missing something but I can't figure it out.

massdebater

https://www.boards.ie/discussion/comment/117737768#Comment_117737768

Yeah it's not just the high CGT rate in Ireland but also the poor exemptions and archaic tax system in a lot of ways. It's the single biggest issue stopping me moving back to Ireland anyway. Just because it's been done like that for years doesn't mean that's a good thing. Crypto friendly countries are going to take a lot of younger talent over the next few years if more established countries are slow to adopt change.

jmlad2020

I have bitcoin purchased years ago using my UK bank account, so using pounds.

I now live/work in Ireland, I will be cashing out the crypto to my UK bank account but should I simply convert the final taxable figure to Euro for revenue or go back and convert the sterling transaction to euro on that day using the exchange rate on that day? ...

Bob24

https://www.boards.ie/discussion/comment/117739260#Comment_117739260

As far as I know, your gains should be calculated as the EUR value on the day of disposal minus the EUR value on the day of purchase (even if the actual transactions were settled in GBP).

Let's say I bought 2k worth of crypto and sold it for 3k, but then instantly reinvest it, does that 1k count towards my CGT tax allowance? So in future I won't be taxed on that 1k gained? I'm thinking if I did that every year, I could get around around CGT in small increments.

deadduck

Sorry, I mis-read your post originally. But once your gain is less than €1,270 in the year, I can’t see how your not in the clear tax wise

jmlad2020

Been investing/trading since 2016 on an old exchange, and not kept a single record on that account. It contains a sizeable amount of crypto and probably has 80-100 trades, I was young back then and didn't understand the whole tax thing. I did it as a hobby.

Sieving though every trade I did years ago will be an absolute nightmare, is there any way around this? Can't I just 33% the total profit and hope for the best? How likely are they to ask for proof? Revenue will see the large deposit in my account anyways and basic math will all add up and correlate with what I would declare. Thanks.

Peregrinus

https://www.boards.ie/discussion/comment/117737768#Comment_117737768

Obviously having a high CGT rate, low annual allowance, etc, does maximise the incentive for Irish residents with large accrued gains to relocate to avoid CGT. 

A number of factor work the other way to reduce the incentive. The main one, in this context, is that you can’t necessarily avoid Irish CGT by leaving Ireland and realising your gains the next day. 

- If you have been resident in Ireland for 3 or more years then you are “ordinarily resident”. If you are ordinarily resident you are chargeable to Irish CGT on your gains. 

- To lose ordinary residence you have to be not resident in Ireland for 3 or more years.

- So, to use emigration to avoid Irish CGT, you need to be out of the country for three years before you dispose of your asset.

That doesn’t suit active traders, who obviously don’t want to freeze all trading for three years. It doesn’t suit people who want to cash out and take the money now. And, of course, it doesn’t suit people who are not confident that, in three years’ time, their crypto will still be worth the squillions that it is worth today. So these groups, all of whom are quite large, are not really motivated to emigrate. The incentive to emigrate is not perhaps as high as some in this thread have suggested.

Still, there’s some incentive to emigrate. But should that bother us? The downside for us, should they emigrate, is that we don’t get the tax on their gain. But that’s hardly an argument that we shouldn’t tax their gain so that they won’t emigrate. Is there any other downside? It’s not as though they are engaged in a socially useful activity, or making a great contribution to Irish society, as people speculating in crypto; their activities confer shag all benefit on the rest of us. We should be worried about the emigration of nurses or teachers or engineers before we worry about the emigration of crypto speculators.

Not saying that high Irish rates of CGT aren’t an issue we need to look at, and don’t cause problems. But, seriously, the emigration of crypto speculators triggered by Irish CGT rates is pretty low down on the list of problems to which we should be devoting our attention. 

[And, no, I don’t think there is a way to part-quote a post. It’s one of the many, many ways in which the recent “upgrade” has degraded boards. But that’s for another forum.]

Peregrinus

A further point on high CGT rates:

Ireland does have high CGT rates, as Bob24's post illustrates. But, swings and roundabouts; Ireland's overall tax burden as a percentage of GDP (GNP* for Ireland) is pretty much the EU average, which means that we have other taxes that are below average. Our "taxes on production and imports" (VAT, excise duties) are pretty close to the EU average; the below-average taxes are "net social contributions" (social insurance contributions and contributions to pension funds, basically).

So I think crypto enthusiast who call for lower CGT (either for crypto, or generally) need to think about what other taxes could or would be raised. The likely answer is, social insurance contributions of one kind or another. So this would be a call for employers and employees to pay higher taxes so that crypto investors could enjoy lower taxes. It's a hard sell, politically.

https://www.boards.ie/discussion/comment/117740331#Comment_117740331

Okay let me give you another scenario. Say I don't sell anything and don't reinvest but acrue gains of 3k over three years, then I sell. I'd be liable for tax on 1730 of that right? Because its a single taxable event that year?

gordongekko

Nobody seems to be bothered paying over 50% income tax but have a problem paying 35% CGT just because it effects them.

Peregrinus

https://www.boards.ie/discussion/comment/117741327#Comment_117741327

Yes. Your gains are not taxable until you realize them. You have only one gain there, and you can deduct the small gains exemption for the year in which the gain is realized. Unused exemptions from previous years cannot be carried forward.

Bob24

https://www.boards.ie/discussion/comment/117740969#Comment_117740969

Yes one common misconception is that many people think labour taxation in Ireland is very high comparatively to other countries. Whereas it actually is one of the lowest in Europe if you include employer social contributions, employee social contributions, and income tax. Page 9 on this document provides a detailed and documented comparison of labour tax burdens for an average worker in multiple countries: https://www.institutmolinari.org/wp-content/uploads/sites/17/2021/07/tax_burden_on_global_workers2021.pdf

And if you were to include the effect of corporate tax which to some extend is an indirect tax on labour, then I suspect Ireland could be the lowest.

Having said that, I do not think that lowering the CGT rate would imply any significant rise in other taxes (maybe no rise at all).

The first reason is that CGT constitutes a very modest part of the government's tax receipts and consequently has a very limited impact on the overall tax picture. This can be verified on page 6 of this document: https://assets.gov.ie/118010/032dd0a9-fa96-4f7c-8e00-8542538d4812.pdf

The second reason is that as we already alluded to, lowering the rate wouldn't automatically mean that the amount of CGT collected by Revenue would drop, and it could even rise as a result (a lower rate tends to lead to more capital remaining in and entering the country, better compliance, and less tax optimisation).

In my opinion decisions on the rate aren't really about the money, and more about the political message the rate is sending.

rob316

https://www.boards.ie/discussion/comment/117741395#Comment_117741395

Because some of invested the net 50% of our salary and feel aggrieved having to pay another 33% tax of the profit we made.

gordongekko

https://www.boards.ie/discussion/comment/117741550#Comment_117741550

And some got gifted money and, via CAT rules paid ZERO tax

circadian

Has anyone filed for mining income? Does it fall under CGT or income tax? (gawwwwwd income tax is so much worse)

FGR

Apologies for what I reckon might have been asked already but hoping someone might help me with this -

I understand the liability for CGT if you make a profit on crypto transactions but if your gains are well below the threshold (€1270?) and possibly even in the negative when you cash out do you still need to declare all the messing around to revenue despite being an experiment in the world of crypto (and just about breaking even?) with no intent on carrying on with this into the next year.

I suppose my other question is - will Revenue be told by exchanges like Binance and Crypto.com how much I've put into them or do they get a generic 'FGR has used our services!!!' alert without letting them know that I dabbled in less than 1k and not a crypto whale who needs auditing?

Peregrinus

https://www.boards.ie/discussion/comment/117741550#Comment_117741550

You're looking at this the wrong way, Rob. Politically, the way this plays out is "I earn an extra €1,000 through the sweat of my brow doing extra shifts and pay tax of 40% on it; you earn an extra €10,000 doing fück all that's of any use to anybody, and pay tax of only 33%, and you're whingeing about it?"

Looking for tax breaks specifically for crypto trading is obviously a non-starter; a couple of attempts have been made on this thread to justify the notion but they are pretty incoherent and, when challenged, have not really been defended.

It might be easier to argue for tax breaks for capital gains in general, but "easier" doesn't mean actually easy. Politically, I think it would be a very hard sell on fairness/equity grounds.

HGVRHKYY

https://www.boards.ie/discussion/comment/117741395#Comment_117741395

Plenty of people are absolutely bothered by the 50% income tax band, but it can at least be justified since income is progressively taxed (but even this needs an overhaul as the threshold is too low and there should be at least one more tier). If you're working full time as well that's guaranteed income. The reason the 33% CGT is such an issue is because of the fact you're already taxed on your income you worked to earn and dedicated effort to be able to allocate to savings, and then you also took further time of your own to learn about investing. And then you use some of your savings which were already taxed upon earning, and get taxed again for simply being in your bank, and YOU take the risk with it by investing it, and if you've actually been smart and manage to succeed, you get shafted for a further 33% on the profit you managed to secure. All after a measly, insultingly low threshold. It's absolutely embarrassing how uncompetitive Ireland's CGT setup is.

Another thing that you weirdos that seem to be trying to justify this pathetic setup are missing is the fact that even with such a punitive setup, the idiots in power that keep this in place are only managing to collect a paltry ~€900m from CGT. You'd say something if it was contributing loads to the economy for how high it is, and if those paying it were well rewarded for their efforts, but it's not. It only accounted for 1.69% of the exchequer tax receipts in 2020, and the people paying this are likely excluded from the overwhelming majority of social supports for the honour of getting shafted. People always say it but we really do have Scandinavian level taxes without their high quality public services and infrastructure.

We should overhaul the whole thing, have a tiered setup so for example something like your first €15,000 profit is tax free, your next €15,000 is taxed at 10% and anything beyond that is taxed at 12.5%-15% max. Eradicate deemed disposal and jail whoever even came up with the thought of it and all that played a part in implementing it, and ensure that the overall process of declaring and dealing with the taxes is as streamlined and easy to sort as possible. Doing this would open up investing to far more people and make people more inclined to actually try, because anecdotally I know for sure the €1,270 threshold and 33% rate put people off bothering to try at all. Do everything we can to make investing savings and trying to grow wealth more accessible and realistically possible for average people. This should all be done in tandem with encouraging wealthy people to start and grow their own businesses, because once someone has extra money to spare they'll be in a much better position to seriously consider this as well and this is very important for growing our economy since it'll ideally create new jobs

gordongekko

Taxes on your after tax income is nothing new. Vat is a prime example

jmlad2020

As CG Tax is self assessed, how likely are revenue to come looking for proof of workings? I'm a long time trader and haven't really kept records. Thinking it will be easier to just 33% the final lump sum for convenience..

Thanks.

relax carry on

https://www.boards.ie/discussion/comment/117753317#Comment_117753317

Everyone keeps asking this as if CGT and cryptocurrency is some sort of special category of tax or asset that means Revenue won't ever find it or will accept whatever is declared. What are the odds? How will they know? Have a look at the quarterly publication lists for a small percentage of people who probably thought something similar. For peace of mind, just make your best effort to calculate your taxable gains based on the records you'll have access to if you try, and pay the CGT due based on your calculations. Don't just randomly take a guess and hope for the best.

Grumpypants

One way to offset (not avoid) the tax is to buy stuff with big government grants. If you cash out 10k and pay 3300 in CGT. Then buy a 10k solar panel system. It will cost you around the 7k as there is a grant of around 3k. You at least get that tax back in a round about way.

You add equity in terms of home value. And A system that size then will easily generate over €500+ in after tax savings a year for the next 30+ years.

Electric cars also have a good 5k grant too.

Can I use my wife's cgt allowance to double the allowance?

deadduck

https://www.boards.ie/discussion/comment/117756848#Comment_117756848

I asked this before, and it seems unless the crypto was bought in both your names originally, you’ll have to transfer/gift her €1270 worth of crypto, which she can sell CGT free.

Bit of rigmarole, but obviously worth it.

https://www.boards.ie/discussion/comment/117757266#Comment_117757266

That's a bit stupid, especially when exchanges don't allow joint accounts and the money Sepa transferred to the exchange from a joint account

Peregrinus

The small gains exemption is not transferrable - it never has been.

The crypto, however, is transferrable, and assets have always been transferrable between spouses with triggering CGT or CAT liabilities. So you can transfer to your spouse so much crypto as would include an accrued gain of €1,270, and your spouse can dispose of it - or not, as your spouse wishes; once you transfer it it's your spouse's asset, not yours.

makeorbrake

Trying to get my head round the tax implications of the following scenario.

• Someone who's not resident in Ireland - buys crypto overseas - then sells it through an account with a crypto exchange that's registered in their name in Ireland. Funds are then sent overseas to repeat the process (it's a modest crypto arbitrage deal).

In this scenario, what tax authority would have an interest in any gain made?

massdebater

https://www.boards.ie/discussion/comment/117774446#Comment_117774446

Has this person lived overseas for at least 3 years?

If not, both ireland and their current country of residency would be interested.

If the person has left ireland more than 3 years ago, their current country of residence would be interested. Although having a crypto account in ireland with an irish address, would have the Irish revenue interested.

That's a messy enough situation though, somewhere along the line this person is claiming residency in ireland (using an Irish address with their Irish crypto account) and overseas (using their foreign address for overseas crypto account).