Online assets vs taxiation

angello90 · 15-06-2016 07:18PM #1

Hi all,

I recently started trading online (via steam market), and effect of these actions is that I have plenty of valuable game assets. I started selling the assets online (for $), and the money goes into my PayPal account, which I withdraw into my bank account (in €).

At first I thought it would be a small amount (in order of couple hundred a year at most), but it looks like it will be much more than that. So far I managed to make approximately €2000. Therefore I decided to look into paying the tax.

Now my estimate is that if I continue earning at this rate I could be looking at making approximately €3000 a month. Now, this is nothing certain, just like with stock market, you never know what will happen tomorrow.

When I looked at the revenue there were couple... options, if you will, and I am not sure under what category I would fall into. Would that be a sole trader? Would this be considered as a income tax, or gain capital tax? My thoughts are biased towards GCT since it's like selling shares, really, but I read on Revenue that GCT would not be a frequent occurrence. I am looking at paying out into my PayPal/Bank account forth-weekly/monthly which I would consider frequent, therefore contradicting GCT definition.

I am also full time employee, and all my taxes are done by my company. I make enough money to put me into the 2nd tax band (40%). How much tax would I be expected to pay for the above? Would that be all taxed at 40%? Would I have to pay all the USC charges (or any additional fees)?

I am planning on heading over to Revenue and asking them all the questions, but I thought I could get some answers of you, and prepare some additional questions, if such arises.

I assume Revenue doesn't have access to my PayPal account, but in Ireland we are expected to declare the income, correct? So they won't care if I have money stored (additional money which comes out of unknown source) on my PayPal or not, I should declare it anyway.

Thanks for any pointers!

gerrybbadd · 16-06-2016 10:20AM

You would be considered a sole trader, and taxed under Income tax. You would have to register as self assessed for tax purposes, if your income is over 5k in the year.

CGT is on the disposal of an asset. In your case, would I be right in saying that you are selling game accounts, that you have levelled up yourself?

There may be VAT implications too, as you are adding value to the original product (VAT meaning Value Added Tax).

I'm not sure if Revenue have access to PayPal records, but if you were transferring over large sums to your bank account out of PayPal, the bank are obliged to report this to Revenue, and you'd be getting a call or letter!

angello90 · 16-06-2016 04:44PM

Hey gerrybbadd, thanks for reply. At first sight it looks like I will be paying a great deal of tax on that so. As for what is sold is assets, skins for weapons, knifes, keys and chests (CS:GO) and items from DOTA2.

I wouldn't say that I add value to the original product, since I trade one (original if you will) for something else, that is of greater value to me, but not the other person.

I rather pay the tax and have clear mind, don't want to think if I get visitors knocking on my door asking for God knows how much.

Well there's always Panama xD

CIARAN_BOYLE · 16-06-2016 08:55PM

angello90 wrote: »

Hey gerrybbadd, thanks for reply. At first sight it looks like I will be paying a great deal of tax on that so. As for what is sold is assets, skins for weapons, knifes, keys and chests (CS:GO) and items from DOTA2.

I wouldn't say that I add value to the original product, since I trade one (original if you will) for something else, that is of greater value to me, but not the other person.

I rather pay the tax and have clear mind, don't want to think if I get visitors knocking on my door asking for God knows how much.

Well there's always Panama xD

It sounds like income tax to me as you appear to be trading. Keep total sales under 37,500 and you can forget completly about vat. Possibly 75,000 as it sounds as if you are selling goods in a game which should be selling goods.

angello90 · 17-06-2016 07:56AM

Sounds reasonable, thanks CIARAN_BOYLE.

Since it would be considered as an income tax, would this value be added to my day job income, and I would pay tax on overall figure? To me it seems to be that way (although a total rip off, and kind of makes me question the purpose of trading at this stage).

So for example if I make 40,000 at work and 20,000 in trading, would I pay 20% on first 33,000 and then 40% on remaining 27,000? Or is there another tax purely for the purpose of the side job income kind of thing (doubt but, hey, why not ask).

Also I am sort of wondering if the income would be considered as a money on my bank account rather than PayPal account. What do you think?

I am getting paid in dollars, so let's assume I got paid $10,000 overall in a financial year. I was withdrawing the money on a monthly basis and let's assume $:€ was always 1:0.5 (for the sake of argument). This would mean I earned €5,000 (and I could show that by presenting the PayPal withdrawal history). When I want to pay the tax, and I declare the €5,000 figure as an income, the $:€ has changed to 1:1. Will revenue tell me that I am trying to avoid paying tax since I made $10,000, which at current rate works out as €10,000? Because this can also be proven that my PayPal account received $10,000 within specific financial year.

Cheers lads!

scheister · 17-06-2016 08:45AM

angello90 wrote: »

Sounds reasonable, thanks CIARAN_BOYLE.

Since it would be considered as an income tax, would this value be added to my day job income, and I would pay tax on overall figure? To me it seems to be that way (although a total rip off, and kind of makes me question the purpose of trading at this stage).

So for example if I make 40,000 at work and 20,000 in trading, would I pay 20% on first 33,000 and then 40% on remaining 27,000? Or is there another tax purely for the purpose of the side job income kind of thing (doubt but, hey, why not ask).

Also I am sort of wondering if the income would be considered as a money on my bank account rather than PayPal account. What do you think?

I am getting paid in dollars, so let's assume I got paid $10,000 overall in a financial year. I was withdrawing the money on a monthly basis and let's assume $:€ was always 1:0.5 (for the sake of argument). This would mean I earned €5,000 (and I could show that by presenting the PayPal withdrawal history). When I want to pay the tax, and I declare the €5,000 figure as an income, the $:€ has changed to 1:1. Will revenue tell me that I am trying to avoid paying tax since I made $10,000, which at current rate works out as €10,000? Because this can also be proven that my PayPal account received $10,000 within specific financial year.

Cheers lads!

Would be an interesting one to look at. Normally any profit made as a result of currency change is liable to CGT. I would think of it this way. U sold $3,000 for July this year at the time it was worth €2,665. you dont withdraw till September its now worth €3,000. You would be liable to income tax on the €2,665 and CGT on the €335.
One of the more experienced heads on here can confirm if my thinking is correct. You have an annual exemption to CGT that might cover most of any CGT gain anywats

CIARAN_BOYLE · 18-06-2016 12:56AM

angello90 wrote: »

Sounds reasonable, thanks CIARAN_BOYLE.

Since it would be considered as an income tax, would this value be added to my day job income, and I would pay tax on overall figure? To me it seems to be that way (although a total rip off, and kind of makes me question the purpose of trading at this stage).

So for example if I make 40,000 at work and 20,000 in trading, would I pay 20% on first 33,000 and then 40% on remaining 27,000? Or is there another tax purely for the purpose of the side job income kind of thing (doubt but, hey, why not ask).

Also I am sort of wondering if the income would be considered as a money on my bank account rather than PayPal account. What do you think?

I am getting paid in dollars, so let's assume I got paid $10,000 overall in a financial year. I was withdrawing the money on a monthly basis and let's assume $:€ was always 1:0.5 (for the sake of argument). This would mean I earned €5,000 (and I could show that by presenting the PayPal withdrawal history). When I want to pay the tax, and I declare the €5,000 figure as an income, the $:€ has changed to 1:1. Will revenue tell me that I am trying to avoid paying tax since I made $10,000, which at current rate works out as €10,000? Because this can also be proven that my PayPal account received $10,000 within specific financial year.

Cheers lads!

Your understanding seems to be right. dont forget usc and prsi too.

Regarding your currency query its best to work on daily coversion rate on date of receipt or average annual rate such as these.

http://www.revenue.ie/en/practitioner/ebrief/2016/no-172016.html

Its also worth considering if you have any legitimate tax deductibles business expenses to set off against your income.

Online assets vs taxiation

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