Capital Gains And Crypto

Brontosaurus · 08-02-2021 3:42am #1

Is the date of disposal the date it enters your bank account, or the date you sold it on an exchange?

If you keep your fiat that you made from the disposal/sale on the exchange, can you keep it there indefinitely or is that taxable?

What if you sell your Bitcoin and then use that fiat to buy another crypto currency?

What if you convert your Bitcoin into Ethereum and sell the Ethereum 2 years later? Which do you owe tax on?

Geuze · 08-02-2021 6:24pm

It is not relevant what happens to the proceeds of the disposal of an asset.

If you dispose of an asset, and make a gain, it does not matter what you do with the proceeds.

What matters is: did you make a taxable capital gain?

Whether you hold the proceeds in whatever form, cash, bonds, another asset, land, that does not matter.

Brontosaurus · 08-02-2021 6:57pm

Geuze wrote: »

It is not relevant what happens to the proceeds of the disposal of an asset.

If you dispose of an asset, and make a gain, it does not matter what you do with the proceeds.

What matters is: did you make a taxable capital gain?

Whether you hold the proceeds in whatever form, cash, bonds, another asset, land, that does not matter.

So the minute you sell any crypto it becomes taxable, therefore the date of disposal is when you sold it regardless of when it enters your bank account?

What if you converted BTC into, for example, ETH and left it as ETH? That isn't selling the BTC, you are literally exchanging it for another crypto directly. There are no proceeds so to speak. There is no fiat involved in this exchange. So I'd imagine it's only taxable from when it's converted into Fiat?

But then what is considered the date of disposal if you were to sell the ETH? Your original investment is in the BTC, but your gain is from ETH.

If that is taxable, that would mean one would have to either pay the tax in ETH (obviously not an option), or convert it into fiat. If that is the case, is the disposal date when you converted BTC into ETH or when you converted ETH into fiat in order to pay the gain from the conversion of BTC into ETH?

What if BTC or some other crypto started becoming widely adopted for day-to-day transactions and was used in the place of fiat? It would be the equivalent of buying a coffee with a % of your Tesla stock.

Doesn't make sense to me. I'm not trying to be smart here, I want genuine answers so that if I were to get into Crypto I can pay my taxes properly. However this isn't made simple or straightforward given the nature of Crypto.

relax carry on · 08-02-2021 8:24pm

It's not that difficult. You are engaged in a taxable activity. Unless you are literally carrying out trades every day then your profit will fall under Capital Gains Tax. Revenue have advised that no special rules apply to the taxation of Cryptocurrency. So if no special rules apply, the normal rules of CGT apply. CGT can occur on the exchange, gifting or sale of an asset. So changing from one Cryptocurrency to another can be a chargeable event. Buying something with Cryptocurrency that has increased in value could be a chargeable event. Cashing out into euros/dollars could be a chargeable event. The activities are carried out online and you are supposed to be keeping good records to allow you to calculate your gains/losses. Links below will assist.

https://www.revenue.ie/en/companies-and-charities/financial-services/cryptocurrencies/index.aspx

https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/index.aspx

Brontosaurus · 08-02-2021 9:16pm

relax carry on wrote: »

It's not that difficult. You are engaged in a taxable activity. Unless you are literally carrying out trades every day then your profit will fall under Capital Gains Tax. Revenue have advised that no special rules apply to the taxation of Cryptocurrency. So if no special rules apply, the normal rules of CGT apply. CGT can occur on the exchange, gifting or sale of an asset. So changing from one Cryptocurrency to another can be a chargeable event. Buying something with Cryptocurrency that has increased in value could be a chargeable event. Cashing out into euros/dollars could be a chargeable event. The activities are carried out online and you are supposed to be keeping good records to allow you to calculate your gains/losses. Links below will assist.

https://www.revenue.ie/en/companies-and-charities/financial-services/cryptocurrencies/index.aspx

https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/index.aspx

I fail to see how converting BTC to ETH and holding it indefinitely is a taxable event? And if one were to convert multiple altcoins into BTC, back into various altcoins etc. several times back and forth, what then?

As for spending BTC and using it as fiat, when would that be a taxable event? Every time you hypothetically buy a coffee with BTC is a taxable event? So if one were to hypothetically live off of BTC for every day-to-day transaction, one could have thousands or even 10s of thousands of taxable events that need to be declared on a capital gains tax return form every year?

Unfortunately those links don't clarify any of this.

CIARAN_BOYLE · 08-02-2021 9:31pm

Brontosaurus wrote: »

I fail to see how converting BTC to ETH and holding it indefinitely is a taxable event? And if one were to convert multiple altcoins into BTC, back into various altcoins etc. several times back and forth, what then?

As for spending BTC and using it as fiat, when would that be a taxable event? Every time you hypothetically buy a coffee with BTC is a taxable event? So if one were to hypothetically live off of BTC for every day-to-day transaction, one could have thousands or even 10s of thousands of taxable events that need to be declared on a capital gains tax return form every year?

Unfortunately those links don't clarify any of this.

Think of it this way. You swap an apartment for a house. That's a taxable event.

So is btc for eth.

Btc to altcoins and back all taxable events.

Living on btc would technically all be taxable events every time you exchange bitcoin for product it would be treated as if you are selling your bitcoin for euro and using euro to buy the product.

Brontosaurus · 08-02-2021 9:40pm

CIARAN_BOYLE wrote: »

Think of it this way. You swap an apartment for a house. That's a taxable event.

So is btc for eth.

Btc to altcoins and back all taxable events.

Living on btc would technically all be taxable events every time you exchange bitcoin for product it would be treated as if you are selling your bitcoin for euro and using euro to buy the product.

Meaning if I was exchanging Cryptos on a regular basis, every single time I exchange one crypto for another I have to pay 33% tax on the sum total of all exchanges for that year?

So indeed if one were to use BTC as currency, despite there being no fiat whatsoever involved, you'd have to pay 33% tax on the sum total of your transactions for that year?

That's absolutely insane.

CIARAN_BOYLE · 08-02-2021 9:44pm

Capital gains tax is a tax on gains on that transaction.

So if you buy a cup of coffee that's worth 2.50 you need to find out how much that 0.001 btc cost you (€2 for example) and pay 33% tax on your 50 cent gain (ie 16.66 cent).

Its insane but if you choose to abandon fiat that's what you sign up for.

Brontosaurus · 08-02-2021 9:50pm

CIARAN_BOYLE wrote: »

Capital gains tax is a tax on gains on that transaction.

So if you buy a cup of coffee that's worth 2.50 you need to find out how much that 0.001 btc cost you (€2 for example) and pay 33% tax on your 50 cent gain (ie 16.66 cent).

Its insane but if you choose to abandon fiat that's what you sign up for.

It's a hypothetical in order for me to understand this better TBF.

And if I traded daily I'd be exempt from this tax? Where could I find info on that if you don't mind me asking?

JibJabWibWab · 08-02-2021 9:51pm

Brontosaurus wrote: »

It's a hypothetical in order for me to understand this better TBF.

And if I traded daily I'd be exempt from this tax? Where could I find info on that if you don't mind me asking?

If you trade daily, and that activity is interpreted as your main source of income, you will be liable for income tax.

Vestiapx · 08-02-2021 9:52pm

Brontosaurus wrote: »

Meaning if I was exchanging Cryptos on a regular basis, every single time I exchange one crypto for another I have to pay 33% tax on the sum total of all exchanges for that year?

So indeed if one were to use BTC as currency, despite there being no fiat whatsoever involved, you'd have to pay 33% tax on the sum total of your transactions for that year?

That's absolutely insane.

No you have to pay on the gain. Spent 100 euros on crypto a and exchange it for 150 euros worth of crypto b and you owe tax on the 50 gain (well you don't because there is a small allowance before it kicks in ) the big example is if you bought really early and were holding 50 coins a d you were buying your day to day goods and services with it you would owe capital gains on the value of the goods and services you obtained less the price you bought in at.

CIARAN_BOYLE · 08-02-2021 9:57pm

Brontosaurus wrote: »

It's a hypothetical in order for me to understand this better TBF.

And if I traded daily I'd be exempt from this tax? Where could I find info on that if you don't mind me asking?

If you were trading daily someone would be making an argument that you are trading crypto as an active business subject to income tax instead of capital gains.

That wouldn't necessarily be better for you.

Heres an British explanation of the badges of trade from acca.

https://www.accaglobal.com/my/en/technical-activities/technical-resources-search/2011/august/badges-of-trade.html

Brontosaurus · 08-02-2021 10:00pm

CIARAN_BOYLE wrote: »

If you were trading daily someone would be making an argument that you are trading crypto as an active business subject to income tax instead of capital gains.

That wouldn't necessarily be better for you.

Heres an British explanation of the badges of trade from acca.

https://www.accaglobal.com/my/en/technical-activities/technical-resources-search/2011/august/badges-of-trade.html

OK thanks for the explanation, my questions might seem a bit thick but I'm just trying to make sure I know what I'm getting into!

CIARAN_BOYLE · 08-02-2021 10:07pm

Brontosaurus wrote: »

OK thanks for the explanation, my questions might seem a bit thick but I'm just trying to make sure I know what I'm getting into!

A lot of posters here deal with their own taxes or have a business or law degree with tax modules or are professionals in the area.

I presume you don't have that background which is fair enough.

I work in the area. At least once a month I have a client whose tax I deal with asking this sort of simple question (and my boss charges some of the clients 200 euro an hour for asking this sort of question). I'm used to it.

At the end of the day we are trying to give simple answers. When I was in college I did multiple classes on the difference on what a taxable event is. I'm not going to replicate 4 hours of college classes in explanations. I assume its needed to give a proper explanation.

Brontosaurus · 08-02-2021 10:17pm

CIARAN_BOYLE wrote: »

A lot of posters here deal with their own taxes or have a business or law degree with tax modules or are professionals in the area.

I presume you don't have that background which is fair enough.

I work in the area. At least once a month I have a client whose tax I deal with asking this sort of simple question (and my boss charges some of the clients 200 euro an hour for asking this sort of question). I'm used to it.

At the end of the day we are trying to give simple answers. When I was in college I did multiple classes on the difference on what a taxable event is. I'm not going to replicate 4 hours of college classes in explanations. I assume its needed to give a proper explanation.

That's fair enough, I got the gist of it I think. Yeah I've no background on any of this, I'm a PAYE employee so I've never had to deal with my taxes directly or file any returns so it's all new to me. I do appreciate the simple explanations, cheers.

Geuze · 08-02-2021 11:16pm

Brontosaurus wrote: »

So the minute you sell any crypto it becomes taxable, therefore the date of disposal is when you sold it regardless of when it enters your bank account?

If I sell shares at 10am, and make a large gain, and then at 10:10am I use the proceeds to buy other shares, that doesn't matter,

The fact that within minutes the proceeds of the transaction became another asset is not relevant.

Let's say I sell land at a huge gain, and get paid in houses.

I sell 100 acres, make a huge gain, and the buyer pays me in houses.

The fact that the consideration in the transaction is houses is not relevant.

The Revenue see I made a large capital gain, and I owe CGT.

The same goes for CAT - you may inherit a hotel, or land, or houses, or gold coins, but you pay CAT in euros.

Geuze · 08-02-2021 11:19pm

Brontosaurus wrote: »

It's a hypothetical in order for me to understand this better TBF.

And if I traded daily I'd be exempt from this tax? Where could I find info on that if you don't mind me asking?

If you undertake a trade every day, then you are subject to income tax on the income earned from that trade.

Geuze · 08-02-2021 11:21pm

Brontosaurus wrote: »

That's fair enough, I got the gist of it I think. Yeah I've no background on any of this, I'm a PAYE employee so I've never had to deal with my taxes directly or file any returns so it's all new to me. I do appreciate the simple explanations, cheers.

Please note that thousands upon thousands of PAYE workers file income tax returns every year.

ILikeBananas · 09-02-2021 6:44pm

There's something that I am not sure about that is probably best asked about using a simplified example:

I buy 1 unit of Crypto A for €1
I sell 1 unit of Crypto A for €11
I buy 1 unit of Crypto B for €11
I sell 1 unit of Crypto B for €5

So I make it that I am required to pay Capital Gains of €3 on account of my gains on Crypto A (30% of 11-1)

Can I offset some of the €6 loss that I incurred on Crypto B from my tax bill?
If so, how much?

barneystinson · 09-02-2021 7:33pm

ILikeBananas wrote: »

There's something that I am not sure about that is probably best asked about using a simplified example:
I buy 1 unit of Crypto A for €1

I sell 1 unit of Crypto A for €11

I buy 1 unit of Crypto B for €11

I sell 1 unit of Crypto B for €5

So I make it that I am required to pay Capital Gains of €3 on account of my gains on Crypto A (30% of 11-1)

Can I offset some of the €6 loss that I incurred on Crypto B from my tax bill?
If so, how much?

A person is taxed on their aggregate chargeable gains, net of allowable losses, in each tax year. So in your case you have a gain of 10 minus a loss of 6, equals total chargeable gains of 4. (Ignoring your annual allowance of 1,270)

Brontosaurus · 09-02-2021 7:51pm

Would the fees that exchanges charge and gas/transfer fees of crypto to and from wallets count towards expenses?

Also, in order to even purchase many crypto currencies you have to buy their tokens in BTC, or some dollar-derived stable coin such as USDC or USDT. So if I am understanding correctly, if I were to exchange euros for USDT in order to buy CryptoExample, I would be liable to tax on the exchange between Euro/USDT AND USDT/CryptoExample? And if I were to then sell CryptoExample back into USDT and USDT back into euro, I'd owe tax on those exchanges to? So I'd owe 33% tax on these 4 exchanges?

If one were to convert Fiat to USDT and then into CryptoExample in the same day we're talking cents or fractions of cents gained/lost, seems like a massive burden to both keep track of all this and report it and the end of the year, as well as for Revenue to go through it all. Simply exchanging/swapping coins isn't in of itself a profitable exercises, it's not the same as paying someone for X in Y. It's equivalent of paying for something valued in USD with Euro.

If I were to sell shares in USD and convert it into EUR, would I owe tax on the Shares/USD and the USD/EUR exchange in the same way?

Also, many Crypto schemes allow for staking, where you lock in your tokens and earn interest either in the same tokens or in another token/currency. I suppose this would be the same as dividends from shares and liable to tax in of itself?

stefanovich · 11-02-2021 3:00pm

I think the preferred approach is buy and hold. Then when you want to cash out leave the country and go somewhere that doesn't tax you to death.

Brontosaurus · 11-02-2021 7:40pm

stefanovich wrote: »

I think the preferred approach is buy and hold. Then when you want to cash out leave the country and go somewhere that doesn't tax you to death.

Some countries will tax your assets if you attempt to gain residency elsewhere, not sure if that's the case with Ireland. Or do what all the upper class and wealthy do, get some off-shore bank accounts

Marcusm · 11-02-2021 11:34pm

Geuze wrote: »

If you undertake a trade every day, then you are subject to income tax on the income earned from that trade.

There is no bright line test which would indicate that a single transaction each day would Amount to a trade - see Salt v IRC. The question of whether an activity is a trade or merely a Series of investments is a factual one based on the particular circumstances. Some would say that a part-activity with the financial markets is presumed not to be a trade unless the contrary can be established with evidence.

Marcusm · 11-02-2021 11:36pm

Brontosaurus wrote: »

Would the fees that exchanges charge and gas/transfer fees of crypto to and from wallets count towards expenses?

Also, in order to even purchase many crypto currencies you have to buy their tokens in BTC, or some dollar-derived stable coin such as USDC or USDT. So if I am understanding correctly, if I were to exchange euros for USDT in order to buy CryptoExample, I would be liable to tax on the exchange between Euro/USDT AND USDT/CryptoExample? And if I were to then sell CryptoExample back into USDT and USDT back into euro, I'd owe tax on those exchanges to? So I'd owe 33% tax on these 4 exchanges?

If one were to convert Fiat to USDT and then into CryptoExample in the same day we're talking cents or fractions of cents gained/lost, seems like a massive burden to both keep track of all this and report it and the end of the year, as well as for Revenue to go through it all. Simply exchanging/swapping coins isn't in of itself a profitable exercises, it's not the same as paying someone for X in Y. It's equivalent of paying for something valued in USD with Euro.

If I were to sell shares in USD and convert it into EUR, would I owe tax on the Shares/USD and the USD/EUR exchange in the same way?

Also, many Crypto schemes allow for staking, where you lock in your tokens and earn interest either in the same tokens or in another token/currency. I suppose this would be the same as dividends from shares and liable to tax in of itself?

Each time you trade a suppose dcoin you are disposing of a chose-in-action, a legal right and therefore an asset, for money’s worth (ie another asset which can readily be converted to money. Absent establishing that a trade exists, not alone must you undertake a capital gains calculation but you must notify Revenue of each acquisition of an individual chargeable asset. Failure to do so renders you liable for. A penalty for failure to file a complete tax return!

Brontosaurus · 12-02-2021 6:02pm

Marcusm wrote: »

Each time you trade a suppose dcoin you are disposing of a chose-in-action, a legal right and therefore an asset, for money’s worth (ie another asset which can readily be converted to money. Absent establishing that a trade exists, not alone must you undertake a capital gains calculation but you must notify Revenue of each acquisition of an individual chargeable asset. Failure to do so renders you liable for. A penalty for failure to file a complete tax return!

Any profit being generated from converting fiat into stable-coin into altcoin which would occur within minutes would generate a profit or loss of fractions of a cent, in fact it would actually incur fees which could be claimed as expenses that far outweigh any 0.001 cents of profit/loss you might gain.

It would make much more sense to compare the cost of the initial fiat investment and the fiat you get out of it at the end once you convert your altcoin into stablecoin into fiat.

But if revenue truly wants to go through so many transactions, then I guess they can have at it. It just causes a massive waste of time for any potential investors, or is that the idea?

CIARAN_BOYLE · 12-02-2021 7:15pm

I buy a house. I swap my house for another house thats worth more. We can't dodge taxes by using barter. I can't tell my boss let's avoid using fiat. You buy my groceries and cut my salary and we hide the difference from revenue.

Why should crypto different to other assets?

This fiat to bitcoin to altcoin to other coin is crap designed to disguise whats going on.

wally1990 · 12-02-2021 7:26pm

CIARAN_BOYLE wrote: »

A lot of posters here deal with their own taxes or have a business or law degree with tax modules or are professionals in the area.

I presume you don't have that background which is fair enough.

I work in the area. At least once a month I have a client whose tax I deal with asking this sort of simple question (and my boss charges some of the clients 200 euro an hour for asking this sort of question). I'm used to it.

At the end of the day we are trying to give simple answers. When I was in college I did multiple classes on the difference on what a taxable event is. I'm not going to replicate 4 hours of college classes in explanations. I assume its needed to give a proper explanation.

How the F do you do this all day with people/clients in tax /accounting
My head would be fried from answering the same questions over and over
Surely people are just trying to think they have found the 1 reason you don't have to declare and pay CGT so you probably spend half the day arguing why they are wrong and wasting your time

CIARAN_BOYLE · 12-02-2021 7:36pm

wally1990 wrote: »

How the F do you do this all day with people/clients in tax /accounting
My head would be fried from answering the same questions over and over
Surely people are just trying to think they have found the 1 reason you don't have to declare and pay CGT so you probably spend half the day arguing why they are wrong and wasting your time

People who pay us for our time shut up after a few minutes in case the bill is too high.

Brontosaurus · 13-02-2021 12:09am

wally1990 wrote: »

How the F do you do this all day with people/clients in tax /accounting
My head would be fried from answering the same questions over and over
Surely people are just trying to think they have found the 1 reason you don't have to declare and pay CGT so you probably spend half the day arguing why they are wrong and wasting your time

I don't think I've found a way to avoid paying tax, I just think the system is completely outdated and inefficient.

Brontosaurus · 13-02-2021 12:10am

CIARAN_BOYLE wrote: »

This fiat to bitcoin to altcoin to other coin is crap designed to disguise whats going on.

You clearly do not understand Crypto if you think that's the reason why some altcoins can't be bought for fiat, nor do the dinosaurs in government or at revenue. I guess give it 20 years and things might progress.

Capital Gains And Crypto

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