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Can we pool our knowledge regarding TAX and crypto and make some kind of FAQ/sticky?

sublime1

There is huge confusion out there regarding the tax situation with crypto. I have seen pretty much every opinion expressed ranging from "crypto is play money and therefore tax free" to "not only is it taxable, but it's considered as income, and every trade (even from one crypto to another) is a taxable event". Many people sit somewhere in between these extremes, and think that only fiat events are taxable, and then only as capital gains. There's the taxback article saying pretty much the latter, and some users here have stated similar, but really there is no consensus, Revenue haven't really clarified the situation, apart from this comment 3 years ago, and we are all potential lambs to the slaughter if we don't sort this out.

What I want to avoid is more speculation from those who are not informed - there is more than enough of that out there already. I have spoken to an accountant, and while he considers that there is room for manoeuvre as this is new territory, he insists that even small numbers of trades could be considered sufficient to meet “badges of trade” criteria, hence being liable for income tax. He considers crypto trading as pretty much equivalent to foreign exchange trading. For those of us who bought a few LTC or ETH and then swapped those for a few of the dozens altcoins, these are scary concepts, and it quickly becomes a real headache trying to resolve.

To me, one of the key questions is: are crypto to crypto trades taxable, or it is only when we sell for fiat? In the US, these are considered "like-kind exchanges" and are not taxable.

So we get an informed conversation going on this please? I'm sure accountants up and down the country have been getting calls from clients wondering how to resolve this, so if we can pool our knowledge, maybe some kind of consensus can be reached, so we can keep Revenue, and therefore ourselves, happy.

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lostboy75

GreeBo wrote: »

No it isn't crypto, but it is an asset, just like crypto is.

You can already pay for things with BTC today, so arguably there is no need to ever convert back to fiat. Following the details of the email shared, revenue.ie are saying "thats ok" no CGT due if you dont dispose back to fiat"

I'm pretty sure this isn't the approach they would want to take, so as I said earlier, I'll wait for published guidelines.

I also find it hard to believe that revenue will reply to a mail without having published anything publicly, but would be delighted to apply for my 2017 tax refund once such guidelines are published!

Now this I fully agree with. Which confirms my earlier posts about clarity is needed.
The reply from revenue is very helpful as a guide to which way they will possibly deal with crypto. But there is not enough there for us to put this to bed.
My view on dine posts above is
If your disposing of any currency by any means, this is a taxable event.
I don't think revenue realise you can actually purchase items with cryptos currently, and this will become more common with time.

As I said earlier, I will record everything. As much for tax as to properly track how I'm getting on.
And when it comes time to file it 'should' be relatively easy to distill all the data down to what's actually relevant at the time.

Fakent.ie

GreeBo wrote: »

No it isn't crypto, but it is an asset, just like crypto is.

You can already pay for things with BTC today, so arguably there is no need to ever convert back to fiat. Following the details of the email shared, revenue.ie are saying "thats ok" no CGT due if you dont dispose back to fiat"

I'm pretty sure this isn't the approach they would want to take, so as I said earlier, I'll wait for published guidelines.

I also find it hard to believe that revenue will reply to a mail without having published anything publicly, but would be delighted to apply for my 2017 tax refund once such guidelines are published!

assuming you paid taxes on your profits for 2017 on crypto if so did they ask to see the proof of tx? or anything crypto related?

GreeBo

Fakent.ie wrote: »

assuming you paid taxes on your profits for 2017 on crypto if so did they ask to see the proof of tx? or anything crypto related?

That only happens in an audit.

Fakent.ie

GreeBo wrote: »

That only happens in an audit.

Ah right thanks unfamiliar with this stuff to be honest

nxbyveromdwjpg

Portugal have declared they wont be taxing crypto profits https://www.publico.pt/2018/01/17/tecnologia/noticia/ganhos-com-bitcoins-nao-pagam-imposto-em-portugal-1799707

As this is Ireland though I think we can expect that the worst case scenario that gouges investors the most, is most likely the valid one.

Fakent.ie

Amirah Cold Cafe wrote: »

Portugal have declared they wont be taxing crypto profits https://www.publico.pt/2018/01/17/tecnologia/noticia/ganhos-com-bitcoins-nao-pagam-imposto-em-portugal-1799707

As this is Ireland though I think we can expect that the worst case scenario that gouges investors the most, is most likely the valid one.

if we moved to protugal and cashed out to fiat there what would the revneue do?
Wouldn't you be making the gains in portugal and not ireland

sunrainmooncl

machiavellianme wrote: »

I took the liberty of contacting revenue due to the constant speculation on here.
Please see below:

Questions:

1. Are cryptocurrency trades subject to tax (or is it considered gambling)?

2. If taxable, is Capital Gains Tax the correct category? I'm not a professional trader.

3. Is the tax calculated at each trade or only when converted back to official currencies like Euro or Dollars etc. i.e. if I swap litecoin for bitcoin, does that count as profit as there is no real profits until the coins are sold to euro?

Responses:

1. & 2. Profits on cryptocurrency trades are subject to Capital Gains Tax

3. The tax due should be calculated when converted to official currencies.

Wow, nice one!!

turbot

machiavellianme wrote: »

What I've learned from the response is that Revenue are quite good to deal with and very helpful. It may not be the fastest correspondence but given the time of year etc I'm impressed.

My experience is the same.

thegolfer

Fakent.ie wrote: »

if we moved to protugal and cashed out to fiat there what would the revneue do?
Wouldn't you be making the gains in portugal and not ireland

No, you would still be taxable in Ireland, for a period of three years, after you leave. Referred to as ordinary residence, and takes three years for you to loose your ordinary residence.

Assuming you are Irish domiciled.

Fakent.ie

thegolfer wrote: »

No, you would still be taxable in Ireland, for a period of three years, after you leave. Referred to as ordinary residence, and takes three years for you to loose your ordinary residence.

Assuming you are Irish domiciled.

So if you left tomorrow and cashed out after 3 years from tomorrow you wouldn't owe them anything?
or are you saying you need to have left for 3 years then cash out to be nontaxable by the revenue?

GreeBo

Fakent.ie wrote: »

So if you left tomorrow and cashed out after 3 years from tomorrow you wouldn't owe them anything?
or are you saying you need to have left for 3 years then cash out to be nontaxable by the revenue?

Aren't they the same thing?

thegolfer

Fakent.ie wrote: »

So if you left tomorrow and cashed out after 3 years from tomorrow you wouldn't owe them anything?
or are you saying you need to have left for 3 years then cash out to be nontaxable by the revenue?

So assuming you are tax resident here for 2018, you'd have to be non tax resident for a full three years. 2019,2020,2021. Cash out in 2022..bingo..

Leaving tomorrow, you could do it a year earlier, as you'd not be considered tax resident for 2018. Staying less than 30 days is not counted towards the day count for residence purposes.

turbot

I've just read through all 21 pages of this thread.

Assuming you are not a day trader... and instead, a crypto-speculator:

Michael Noonan's indication:

"However, it is likely that gains accruing from speculation on Bitcoin would be liable for CGT in the normal way."

Plus MachiavellianMe's answer from Revenue:

"1. & 2. Profits on cryptocurrency trades are subject to Capital Gains Tax

3. The tax due should be calculated when converted to official currencies."

Provides a practical framework that allows for two courses of action... profit measured on a trade by trade basis or profit measured when actually converted into fiat currency as opposed to calculated as a fiat currency equivalent.

Given the crazy volatility of cryptocurrencies and different prices on different exchanges... plus limited and expensive practical options for converting crypto to fiat (e.g. for an alt coin, you might have to convert to ETH, in order to transfer to coinbase, then exchange for euros, where coin base charge 5% and you have to pay gas) and the complexity of 1400+ currencies on diferent blockchains... measuring profits on a "per trade" basis is just hard when most exchanges using BTC or ETH as "vehicle currencies" - i.e. you can't change one coin for another without using one of those.

On this basis, given the clarifications, it seems smart to pay a straight line CGT rate of 33% on any draw down (i.e. conversion to fiat) at that time... (provided annual gains exceed 1270) *and* to do you utmost to keep your investment portfolio as simple as possible and your trades tracked as you go along in as much detail as you can. A lot of that detail is available on the blockchain... and other detail can be exported from most exchanges provided you do so within a certain time period.

Lets say you were able to turn 5000 into 20700, meaning that your gains were 15k + 1270, if you pay 5000 in CGT, note your method and sources, and have a decent data set to backup how you achieved these crypto-investment gains, you are being practical and thorough. Obviously this gets more complicated if you only draw down a certain amount each year going forward etc... but I think this approach represents good quality self-assessment given what is known and has been communicated about this area for now.

lifeandtimes

thegolfer wrote: »

No, you would still be taxable in Ireland, for a period of three years, after you leave. Referred to as ordinary residence, and takes three years for you to loose your ordinary residence.

Assuming you are Irish domiciled.

Buttttttttt if you were on holiday in Portugal, hadn't made any profits in Ireland and every trade etc you made while over there made you a small fortune, would you still have to pay Irish taxs even thought the profit you made was in a different country through crypto etc?

If yes then it seems a bit crap but then everyone would go abroad to do their trading.

lifeandtimes

turbot wrote: »

I've just read through all 21 pages of this thread.

Assuming you are not a day trader... and instead, a crypto-speculator:

Michael Noonan's indication:

"However, it is likely that gains accruing from speculation on Bitcoin would be liable for CGT in the normal way."

Plus MachiavellianMe's answer from Revenue:

"1. & 2. Profits on cryptocurrency trades are subject to Capital Gains Tax

3. The tax due should be calculated when converted to official currencies."

Provides a practical framework that allows for two courses of action... profit measured on a trade by trade basis or profit measured when actually converted into fiat currency as opposed to calculated as a fiat currency equivalent.

Given the crazy volatility of cryptocurrencies and different prices on different exchanges... plus limited and expensive practical options for converting crypto to fiat (e.g. for an alt coin, you might have to convert to ETH, in order to transfer to coinbase, then exchange for euros, where coin base charge 5% and you have to pay gas) and the complexity of 1400+ currencies on diferent blockchains... measuring profits on a "per trade" basis is just hard when most exchanges using BTC or ETH as "vehicle currencies" - i.e. you can't change one coin for another without using one of those.

On this basis, given the clarifications, it seems smart to pay a straight line CGT rate of 33% on any draw down (i.e. conversion to fiat) at that time... (provided annual gains exceed 1270) *and* to do you utmost to keep your investment portfolio as simple as possible and your trades tracked as you go along in as much detail as you can. A lot of that detail is available on the blockchain... and other detail can be exported from most exchanges provided you do so within a certain time period.

Lets say you were able to turn 5000 into 20700, meaning that your gains were 15k + 1270, if you pay 5000 in CGT, note your method and sources, and have a decent data set to backup how you achieved these crypto-investment gains, you are being practical and thorough. Obviously this gets more complicated if you only draw down a certain amount each year going forward etc... but I think this approach represents good quality self-assessment given what is known and has been communicated about this area for now.

You speak sense but until some copies a direct response from revenue no one will take your advice for fear of being ruined

thegolfer

lifeandtimes wrote: »

Buttttttttt if you were on holiday in Portugal, hadn't made any profits in Ireland and every trade etc you made while over there made you a small fortune, would you still have to pay Irish taxs even thought the profit you made was in a different country through crypto etc?

If yes then it seems a bit crap but then everyone would go abroad to do their trading.

If a holiday only, you'd still be a tax resident in Ireland, and being so liable to be taxed here on your worldwide gains and income.

In order to loose your residence and ordinary residence you'd have to be non resident for the three years.

Fakent.ie

GreeBo wrote: »

Aren't they the same thing?

One you would cash out tomorrow the other you'd cash out in 3 years

AlmightyCushion

Fakent.ie wrote: »

One you would cash out tomorrow the other you'd cash out in 3 years

You would have to wait the 3 years to cash out.

Fakent.ie

AlmightyCushion wrote: »

You would have to wait the 3 years to cash out.

Yeh that was my question thanks.

[Deleted User]

Selik wrote: »

It would actually be 5k less 0.5k less 1,270 = 3,230.

Why? Because you only withdrew 50% of your investment you only count 0.5k as your original amount invested for the purpose of this calculation. Other than that it's a good formula and not a million miles from the way I'm doing things.

Why would you calculate like that, why wouldn't you subtract your full investment amount regardless of what percentage of your investment you withdraw. No reason at all relate money you put in as a ratio to what you with draw out. 1k in first 1k out gets called the investment amount coming back out.

AlmightyCushion

Angel Dead Apartment wrote: »

Why would you calculate like that, why wouldn't you subtract your full investment amount regardless of what percentage of your investment you withdraw. No reason at all relate money you put in as a ratio to what you with draw. 1k in first 1k out gets called the investment amount coming back out.

Because the way he describes it is usually how it works.

turbot

As a related point, the Irish Government would be smart to create a cryptofriendly tax regime (for legitimate, legal cryptoearnings) because it may essentially promote a kind of FDI (cryptoinvestments in Irish cos subject to tax relief) and may in fact lead to more tech talent becoming tax resident here (so more DAOs incorporate entities here and have staff).

Peregrinus

turbot wrote: »

As a related point, the Irish Government would be smart to create a cryptofriendly tax regime (for legitimate, legal cryptoearnings) because it may essentially promote a kind of FDI (cryptoinvestments in Irish cos subject to tax relief) and may in fact lead to more tech talent becoming tax resident here (so more DAOs incorporate entities here and have staff).

Absolutely the last thing any sane government would wish to do is to create a tax regime intended to incentivise investment in what has all the appearances of the classic bubble.

Note that I'm not saying that the crypto market is a bubble. But it's undeniable, except to the deluded, that it could turn out to be, and of course a number of commentators are already identifying it as a bubble. No government will wish to be seen as having promoted investment in it.

By all means invest in crypto if that's what your judgment leads you to do. But absolutely do not invest on the basis of any expectation of government action designed to support or favour such investments. This is wildly unlikely to happen.

Peregrinus

Angel Dead Apartment wrote: »

Why would you calculate like that, why wouldn't you subtract your full investment amount regardless of what percentage of your investment you withdraw. No reason at all relate money you put in as a ratio to what you with draw out. 1k in first 1k out gets called the investment amount coming back out.

You're only entitled to deduct the investment cost of the assets that you have actually disposed of - it's the gain on those assets that is subject to CGT. So if you only dispose of part of your crypto holdings, but claim the acquisition cost of your entire crypto holdings, you're effectively claiming that you paid that amount for the particular crypto you disposed of, and the crypto you are still ho lding you got for free from the magic crypto fairy in the sky. The Revenue will not find this argument convincing.

GreeBo

Angel Dead Apartment wrote: »

Why would you calculate like that, why wouldn't you subtract your full investment amount regardless of what percentage of your investment you withdraw. No reason at all relate money you put in as a ratio to what you with draw out. 1k in first 1k out gets called the investment amount coming back out.

That's how you calculate a gain on things.
In your example how would you calculate the gain on anything after the first 1k?

turbot

Peregrinus wrote: »

Absolutely the last thing any sane government would wish to do is to create a tax regime intended to incentivise investment in what has all the appearances of the classic bubble.

Note that I'm not saying that the crypto market is a bubble. But it's undeniable, except to the deluded, that it could turn out to be, and of course a number of commentators are already identifying it as a bubble. No government will wish to be seen as having promoted investment in it.

By all means invest in crypto if that's what your judgment leads you to do. But absolutely do not invest on the basis of any expectation of government action designed to support or favour such investments. This is wildly unlikely to happen.

Like they did for the housing market?

Blockchain, DAOs, smart contracts, tokenised assets, immutable ledgers... and all the applications built around them are likely to change society as much as the suite of technologies that enabled the internet. We haven't seen anything yet but once 3rd gen blockchain apps start working properly and/or platforms like EOS achieve the kinds of sub-second 10,000 transactions/second speeds, they'll eat the infrastructure of society as we know it (money and asset layer).

Regulation that is excessively limiting for blockchain could prevent such innovation from occuring domiciled in Ireland. The Irish Government has a pretty good track record of policies that promote economic advantage relative to other countries paying less attention. Obviously, an easy way to enable this would be to make sure that crypto-profits invested in Irish domiciled businesses had favourable tax treatment relative to other territories. Other countries have already made moves in such directions so.... I hope policy makers are reading this thread too.

Of course, cryptocurrencies ought to be viewed as highly speculative investments and anyone taking out loans to buy crypto are risking their economic future. At the same time, policies that increase the braintrust of blockchain teams here has to be a good thing for the economy in the mid-term.

[Deleted User]

GreeBo wrote: »

That's how you calculate a gain on things.
In your example how would you calculate the gain on anything after the first 1k?

You would obviously still compare it to the original 1k you invested even if it's removed. I obviously visualise things very different to you. When I'd look at the current value of an investment in my head I'm subtracting the initial investment. If I withdrew the initial investment amount I'd simply look at the entire current amount as being a gain as I would have already pocketed the original investment. But I still know that say my original investment was 1k so it's not difficult to compare to that even if you ahec withdrawn.

I refuse to believe this is the correct way to calculate things.

Peregrinus wrote: »

you're effectively claiming that you paid that amount for the particular crypto you disposed of, and the crypto you are still ho lding you got for free from the magic crypto fairy in the sky. .

No I'm not, I'm looking at the entire investment as having one euro value. 1k in buys 10 coins at 100 each, coins now worth 1k each so overall investment is worth 10k. I look at having 9k gained from from a 1k investment so if I sell 1k I'm simply withdrawing my original investment and allowing the profit only to remain invested.

AlmightyCushion

Angel Dead Apartment wrote: »

You would obviously still compare it to the original 1k you invested even if it's removed. I obviously visualise things very different to you. When I'd look at the current value of an investment in my head I'm subtracting the initial investment. If I withdrew the initial investment amount I'd simply look at the entire current amount as being a gain as I would have already pocketed the original investment. But I still know that say my original investment was 1k so it's not difficult to compare to that even if you ahec withdrawn.

I refuse to believe this is the correct way to calculate things.

No I'm not, I'm looking at the entire investment as having one euro value. 1k in buys 10 coins at 100 each, coins now worth 1k each so overall investment is worth 10k. I look at having 9k gained from from a 1k investment so if I sell 1k I'm simply withdrawing my original investment and allowing the profit only to remain invested.

That isn't the way it works, for tax purposes at least. If you sell one of those coins, you have made a €900 gain.

GreeBo

Angel Dead Apartment wrote: »

I refuse to believe this is the correct way to calculate things.

No I'm not, I'm looking at the entire investment as having one euro value. 1k in buys 10 coins at 100 each, coins now worth 1k each so overall investment is worth 10k. I look at having 9k gained from from a 1k investment so if I sell 1k I'm simply withdrawing my original investment and allowing the profit only to remain invested.

You bought 10 assets (10 coins) @ €100
You are now selling 10% of your assets (1 coin) which are worth €1000 each
So you are realising a gain of €900 on this disposal.

Whats your argument against this?

GreeBo

An extreme but plausible example of why your approach is wrong would be:

You buy 100 BTC for €10 back in 2007.

You sell 99.9995 BTC for €20K each, receiving €1,999,990

Do you think you don't owe any tax since you still have €10 worth of coins left?