Crypto tax situation - Read post 1 for thread banned users

Worztron

https://www.boards.ie/discussion/comment/121360933#Comment_121360933

I see, thank you.

Donald Trump

https://www.boards.ie/discussion/comment/120497280#Comment_120497280

When your assets are liquidated to pay off your loan, that would still trigger a chargeable event for you as regards CGT if there are capital gains on them. In your example, on the 70k gain.

erlichbachman

If you make a purchase with crypto would that trigger CGT taxable event?

Peregrinus

https://www.boards.ie/discussion/comment/121465829#Comment_121465829

Yes. You're disposing of your crypto.

Worztron

https://www.boards.ie/discussion/comment/121465967#Comment_121465967

I thought it was only if you converted to BTC to cash that CGT would needed to be paid. Damn.

erlichbachman

https://www.boards.ie/discussion/comment/121465967#Comment_121465967

How would that change? Would BTC need to be made legal tender, or something else?

For example, if I purchase gbp with my euro, and then buy a car with that gbp, the taxman doesn’t care whether my gbp was worth more/less. But if I purchase BTC and buy a car with that then I have to consider cgt.

What would need to change for BTC to be considered same as the gbp example?

relax carry on

https://www.boards.ie/discussion/comment/121474088#Comment_121474088

CGT events can occur on the sale, gift or exchange of an asset. Somehow only the "sale" part of the trio seems to be the one most people remember.

Worztron

https://www.boards.ie/discussion/comment/121474115#Comment_121474115

That's a great question!

Worztron

https://www.boards.ie/discussion/comment/121476605#Comment_121476605

I see, thank you.

Worztron

https://www.boards.ie/discussion/comment/121476605#Comment_121476605

So for example, if I convert some BTC to XMR, I must file a tax return on that?

Worztron

https://www.boards.ie/discussion/comment/121476605#Comment_121476605

What would be some examples of exchange of a [CC] asset?

relax carry on

https://www.boards.ie/discussion/comment/121481599#Comment_121481599

Normal CGT rules apply to Crypto currency so essentially, yes. It's an annual return; so it's the cumulative total of your gains/losses for a particular tax year. It's not a CGT return every time you have a CGT event. And it's self assessed system. You are the one who is supposed to know what they are doing tax wise and it's up to you to carry out the calculations, pay and CGT due at the correct time and follow up with a CGT return. You can of course, employ someone to do this for you.

relax carry on

https://www.boards.ie/discussion/comment/121481601#Comment_121481601

You just gave one above. Converting some Bitcoin to Ethereum for example. Using some Bitcoin to purchase something or pay for some service.

Peregrinus

https://www.boards.ie/discussion/comment/121474115#Comment_121474115

For that to change, cryptocurrency would have to become, well, currency.

Most CGT regimes do not regard currency (including foreign currency) as an asset. So if you're resident in Ireland, or the UK, or the US, and you have a bank account denominated in (say) Chinese Yuan (because, e.g., you buy lots of stuff from China) that's not regarded as an asset, when you buy something using your Yuan you are not regarded as disposing of an asset, you are not chargeable to CGT/can't claim a capital loss because the CNY has risen/fallen against EUR while you were holding it.

So why doesn't the same apply if you hold an account with BTC in it? Because neither the Irish or the UK nor the US (nor, I think, pretty well any) revenue authorities regard BTC as a currency. As far as they're concerned, it's an asset.

Why? Well, you can look at this in two ways.

From the legal point of view, BTC is not issued by a Central Bank or backed by a government, and it is legal tender almost nowhere (and most cryptocurrencies are legal tender actually nowhere). And those are factors that most revenue authorities point to when asked why they don't treat it as a currency for tax purposes.

From the economic point of view, BTC and other cryptos don't function as a currency. As far as the economists are concerned, currencies act as (1) a medium of exchange (2) a store of value and (3) a unit of account. While you can use crypto to make purchases or settle debts, the amount actually so used is a negligible proportion of the whole amount in issue, and most people who hold crypto never use it for that purpose. (Gold is far more often used to make purchases and settle debts, and gold is not a currency.) Crypto is a lousy store of value — it would need much more stable price characteristics to function as a store of value — and pretty much nobody uses it as a unit of account. So, basically, the economic function that crypto actually serves would have to change radically before you could mount any kind of persuasive argument that crypto is really a bunch of currencies, and should have the tax treatment appropriate to that.

nompere

https://www.boards.ie/discussion/comment/121485334#Comment_121485334

Revenue here disagree with you in relation to foreign currency.

This is what they say:

"Under Section 532 TCA 1997 any currency other than the euro

is an asset for the purposes of CGT. Accordingly, a chargeable gain / allowable loss can

arise to a person buying and selling foreign currency otherwise than in the course of

trade. That gain / loss is computed by reference to the corresponding euro value of

the purchase price and the sale proceeds."

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

UK Revenue do take a different attitude.

Peregrinus

Oh, God — brainfart on my part. You're quite right, of course.

I'll blame it on too may pre-Christmas drinks.

tk123

I hit my hodl target yesterday and cashed out(!) No more watching prices of coins and good luck to everyone who has hung on to them. 🫣

Have I got this right - I can pay the CGT now/before 15th of Dec and then file the form 12 next year?

relax carry on

https://www.boards.ie/discussion/comment/121874832#Comment_121874832

Pay the CGT before December 15th and file a form CG1 by October 31st 2025.

Worztron

https://www.boards.ie/discussion/comment/121876812#Comment_121876812

So I can just sell some BTC now and don't need to bother with the Irish revenue or anything else for 9 months?

Worztron

What website do ye recommend selling BTC on?

cnocbui

https://www.boards.ie/discussion/comment/121882617#Comment_121882617

Kraken.

relax carry on

https://www.boards.ie/discussion/comment/121882613#Comment_121882613

Same as any other assets disposed where CGT events occur. Just make sure you've got the funds held back to pay any CGT liability. And don't forget to follow up with the CG1 return next year.

PotatoPie87

Can’t post a link yet.

Cryptocurrency trader, journalist and landlords among latest list of tax defaulters

www.Irishexaminer .com/business/companies/arid-41351470.html

cnocbui

Very interesting. I was just reading up on Ireland's tax treaty with Portugal only a few days ago.

I'm no lawyer and I did skim read a lot of it and might have missed something, but the two things that most struck me was there appears to be no provision for enforcement, so your lad in Portugal is going to have to be feeling very generous for that sum to be paid.

The other thing was that the treaty seems to give no recognition to Ireland's crazy 3 year claim to CGT on asset disposal nonsense, which I have always thought was unenforceable hopium.

From Article 13

5.Gains from the alienation of any property, other than that referred to in the preceding paragraphs of this Article, shall be taxable only in the Contracting State of which the alienator is a resident.

Peregrinus

Countries generally don't enforce one another's tax debts, and the IRL-PRT tax treaty is standard in making no provision for this. Enforcement by country A of the tax liablities of someone who is outside the country generally depends on the person having assets or interests in country A that can be pursued — or, of course, on the person coming to country A at some point.

As regards enforcing the CGT liabilities of someone who has ceased to be resident but remains ordinarily resident, the situation is the same. You can't, unless there are assets within the jurisdiction that you can chase, or unless the person acquires some at some point.

On edit: I'm a bit slow this morning, sorry. I realise the second point you make is that Art 13 says that only the country of residence can tax (most) capital gains. Combines with Art 4, which seeks to ensure that everybody is deemed to be a resident of just one state, does this mean that, once you establish tax residence in Portugal under Art 4, then under Art 13 Ireland can't tax your crytpo gains on the basis of you still being ordinarily resident, as a matter of Irish law, in Ireland? The upshot would be (a) that Ireland couldn't tax your crypto gains, and (b) Portugal in theory could (but wouldn't, because Portugal doesn't have a capital gains tax).

It's an interesting argument, and I'd be interested to know what Revenue practice here is. But bear in mind that the stated purpose of the DTA is "the avoidance of double taxation". Can the taxpayer invoke the treaty when there is no attempt at double taxation? If in fact the gains are taxable in Ireland only, there's no double taxation that needs to be avoided and the view may be that, in those circumstances, the treaty terms don't apply, and don't override Irish law.

HGVRHKYY

https://www.boards.ie/discussion/comment/121886511#Comment_121886511

https://www.eumonitor.eu/9353000/1/j4nvk6yhcbpeywk_j9vvik7m1c3gyxp/vitgbgiuuez5

EU countries can and do enforce each other's tax debts, but I would say you're correct in saying that it's difficult for them to enforce in cases where the individual has no assets like property in Portugal or a salary (maybe they could seize the crypto itself, but anyone moving due to crypto is surely capable of avoiding that issue). If you're going to do this, the safest bet is somewhere outside the EU, like Dubai.

cnocbui

https://www.boards.ie/discussion/comment/121885458#Comment_121885458

The cryptocurrency trader appears to be a very admirable character, and I am not being facetious. He also appears to have a masters degree in law: https://pt.linkedin.com/in/grahamdebarra

Peregrinus

https://www.boards.ie/discussion/comment/121888289#Comment_121888289

Being a tax defaulter doesn't mean that you don't know the law, or that you set out to break it.

Obviously I know nothing about the facts of this particular case, but one way someone who trades in crypto (or other volatile assets) might find themselves in default is something like this: I sell a holding of crypto A and invest in crypto B instead. The holding of crypto A generates a large chargeable gain and consequent tax liablity, which I have to pay next December. But, because I expect crypto B to appreciate in value, I do not immediately sell some of crypto B for cash to meet the liability and bank the cash until December; I hold on to crypto B intending to sell only when the tax liability is due. But crypto B tanks and, when the tax liability is due, I don't have the funds to meet it. So I become a tax defaulter.

In fact, it doesn't even have to be that the tax liability was generated by dealing in crypto. All the really matter in this story is that someone has liabilities that they will need to meet at some point in the future, and they rely on a holding of a volatile asset to enable them to meet that liability when it falls due. Their assets don't match their liabilities, and that generates a risk. If the risk goes well — if the volatile assets appreciate in value before the liability has to be met — they can make a lot of money but if it goes badly — if the volatile assets depreciate — then, depending on the scale of their liablities, they could face not only tax default but significant loss of wealth, insolvency, bankruptcy.

Worztron

https://www.boards.ie/discussion/comment/121882706#Comment_121882706

The poor rating is very off-putting. :(

https://ie.trustpilot.com/review/kraken.com

Mellor

https://www.boards.ie/discussion/comment/121890854#Comment_121890854

That's an explainable situations were somebody unintendedly defaults. And I don't know the specifics at all either, but the fact he is in Portugal, seems to suggest an effort to avoid tax on the crypto.