Crypto tax situation - Read post 1 for thread banned users

kippy wrote: »

The thing is, most of the things people ask on here are fairly easily "googleable" already in generally more up to date than having to rely on a somewhat static post (that someone needs to update)
What people need to know is pretty much in here:
https://www.revenue.ie/en/companies-and-charities/financial-services/cryptocurrencies/index.aspx
Any posts really are most likely looking for a clarification of what is there or how best to minimise what they pay - , the answers to which vary depending on some variable.

Some more stuff here:
https://www.mooreireland.ie/MediaLibsAndFiles/media/nathansweb.moorestephens.com/Publications/Tax-Treatment-of-Cryptocurrency-Brochure-Web-Final.pdf
https://irishtechnews.ie/crypto-taxes-in-ireland-how-to-prepare/
Maybe stil that link to these three in the OP?

I am always concerned when I see certain questions being asked in here, when there is a lot of information already around the topic out on the net, information that needs to be understood and particulaily if you are serious (about investing in general, not just crypto)

Basically all the above documentation can be summarised in one sentance: crypto is no different from any other financial asset as far as CGT is concerned.

But the big shame is they don't cover all the things which are specific to crypto (i.e. for which there are genuine questions to be asked): staking rewards, airdrops, crypto interest payments and DeFi rewards, etc ...

Revenue really needs to catch-up with these and update their documents. Today I think even the most honest and well documented taxpayer has no way to find clear directions on if and how they are supposed to declare an airdrop on their tax return.

Rob2D wrote: »

Let's change the topic a bit for fun.

How would crypto mining be taxed??

Not that anyone would ever declare it anyway since it's impossible to prove almost. But if they did? Was wondering about it the other day.

Still CGT I would imagine
Not declaring it is tax fraud/ evasion

Seve OB wrote: »

Still CGT I would imagine
Not declaring it is tax fraud/ evasion

CGT is only on the price difference between the time you received the mined coin and the time you are disposing of it (i.e. if you minded a BTC when it was worth 10000 and are selling it for 50000, you owe 33% CGT on the 40000 euros worth of capital gain).

But most likely you are also meant to pay a tax on receiving the coin itself (i.e. a fraction of the original 10000 in my previous exemple).

In the case of a business, this is most likely just profit which will be built-into their corporate tax. But for an individual I don't quite know ... it could be considered income and taxed at your marginal rate (same as receiving dividends on company shares), but that is just me guessing and I do't think Revenue's documentation clarifies this.

Bob24 wrote: »

CGT is only on the price difference between the time you received the mined coin and the time you are disposing of it (i.e. if you minded a BTC when it was worth 10000 and are selling it for 50000, you owe 33% CGT on the 40000 euros worth of capital gain).

But most likely you are also meant to pay a tax on receiving the coin itself (i.e. a fraction of the original 10000 in my previous exemple).

In the case of a business, this is most likely just profit which will be built-into their corporate tax. But for an individual I don't quite know ... it could be considered income and taxed at your marginal rate (same as receiving dividends on company shares), but that is just me guessing and I do't think Revenue's documentation clarifies this.

I don’t know enough about mining so forgive me if I’m wrong but if you mine, do you have no capital outlay?

CGT is on your gain & your gain would be 50k

Bob24 wrote: »

Basically all the above documentation can be summarised in one sentance: crypto is no different from any other financial asset as far as CGT is concerned.

But the big shame is they don't cover all the things which are specific to crypto (i.e. for which there are genuine questions to be asked): staking rewards, airdrops, crypto interest payments and DeFi rewards, etc ...

Revenue really needs to catch-up with these and update their documents. Today I think even the most honest and well documented taxpayer has no way to find clear directions on if and how they are supposed to declare an airdrop on their tax return.

Disagree. Take airdrops for example. No different to getting free shares in a company.

Revenue can’t make everything micro specific.

Seve OB wrote: »

I don’t know enough about mining so forgive me if I’m wrong but if you mine, do you have no capital outlay?

CGT is on your gain & your gain would be 50k

You have mining costs yes which can probably be offset against the value of the coin you have received.

But when you are receiving the coin as a mining reward it is not a capital gain. It is a payment for a service you have delivered.

A capital gain is when you acquire an asset at a certain price, and then dispose of that same asset at a higher price.

Seve OB wrote: »

Disagree. Take airdrops for example. No different to getting free shares in a company.

Revenue can’t make everything micro specific.

If there is a general rule covering this situation, would you have a reference on the Revenue website? Where does it go in a tax return and what tax does apply?

For exemple, for purchases and disposals of crypto, it is clear the generic CGT rules apply which are documented here: https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/index.aspx

What generic rules could be mapped to receiving an airdrop on the Revenue website?

Bob24 wrote: »

If there is a general rule covering this situation, would you have a reference on the Revenue website? Where does it go in a tax return and what tax does apply?

For exemple, for purchases and disposals of crypto, it is clear the generic CGT rules apply which are documented here: https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/index.aspx

What generic rules could be mapped to receiving an airdrop on the Revenue website?

I’m not a tax accountant and am not familiar enough to guide you, nor do I wish to spend ages doing your research. I suggest if you or anyone else cannot complete their own tax return correctly, then you should seek professional guidance from a tax accountant.

kippy

Bob24 wrote: »

If there is a general rule covering this situation, would you have a reference on the Revenue website? Where does it go in a tax return and what tax does apply?

For exemple, for purchases and disposals of crypto, it is clear the generic CGT rules apply which are documented here: https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/index.aspx

What generic rules could be mapped to receiving an airdrop on the Revenue website?

No idea but I'd assume the tax comes into it on disposal of the asset.

Seve OB wrote: »

I’m not a tax accountant and am not familiar enough to guide you, nor do I wish to spend ages doing your research. I suggest if you or anyone else cannot complete their own tax return correctly, then you should seek professional guidance from a tax accountant.

This was might point: neither you nor I know what existing tax rule applies to airdrops, if any. And none of the documentation I have seen online or from Revenue addresses that point. This needs to be clarified because it is not clear if it even fits an existing tax rule.

If you expect your average tax advisor to be able to answer this question I think you are very optimistic, they also rely on guidance from Revenue and I am not sure Revenue knows themselves (as it is very much open for interpretation).

kippy wrote: »

No idea but I'd assume the tax comes into it on disposal of the asset.

Let me give a real-life scenario some people in Ireland will be facing.

Someone owns whatever amount of XRP tokens (yes, I know I picked a controversial one :-)

This year they will be receiving airdrops of Spark tokens (I believe the airdrops will happen gradually across several months, but say when it they are all completed the person is in possession of Spark tokens which as a whole were valued 2000 euros *at the time they received them*).

Then next year they dispose of those tokens, selling them for 5000 euros (because the price has appreciated).

What is very clear to me is that they have made 3000 euros worth of capital gains (they are selling for 5000 euros something which was worth 2000 euros at the time it came into their possession). And CGT is due on these 3000 euros (minus their yearly CGT allowance of course).

But they probably also need to pay a tax on the fact that they received 2000 euros worth of token in the first place, just because they were XRP holders. And clearly this is not capital gains tax (they didn't make money from the asset appreciating in value: the asset was just given to them). Is it considered interest because they received it in exchange for holding XRP, is it considered an income? Or something else? Frankly I doubt your average tax accountant is able to answer that question as it is very much open for interpretation (and I am not even sure Revenue knows). Which is why I think more guidance is required.

Bob24 wrote: »

This was might point: neither you nor I know what existing tax rule applies to airdrops, if any. And none of the documentation I have seen online or from Revenue addresses that point.

Lots of tax stuff that you or me will not know because we are not professional.

Have you sought professional advice?

Rob2D

Seve OB wrote: »

Lots of tax stuff that you or me will not know because we are not professional.

Have you sought professional advice?

But who do you get it from? Who are these professionals? The Revenue themselves don't even have answers for this stuff. And new things are are being introduced at a rapid pace.

Most accountants I know are over 50 and look to me to explain to them what a Bitcoin even is.

How can we expect any of them to be experts on all aspects of a blockchain? A technology, that in many ways, is still in it's infancy.

kippy

Rob2D wrote: »

But who do you get it from? Who are these professionals? The Revenue themselves don't even have answers for this stuff. And new things are are being introduced at a rapid pace.

Most accountants I know are over 50 and look to me to explain to them what a Bitcoin even is.

How can we expect any of them to be experts on all aspects of a blockchain? A technology, that in many ways, is still in it's infancy.

The technology might be but it's not the technology that is being taxed. It is the individual.
You don't think revenue deal with complex situations on a regular basis?

If the technology becomes a problem guess what happens?

Rob2D wrote: »

But who do you get it from? Who are these professionals? The Revenue themselves don't even have answers for this stuff. And new things are are being introduced at a rapid pace.

Exactly. As I was saying, expecting a tax advisor to know what an airdrop is and its tax treatment is probably wishful thinking.

What they have to offer is a good knowledge of our tax laws and years of experience on how to apply them. I of course respect the value of this service.

But for things like this which are open to interpretation because they are new and could fit into different tax buckets, they are relying on guidance from Revenue as much as we do. And Revenue themselves would have to give it some thoughts before forming an opinion and sharing it.

At the end of the day, IMO the value of this thread is two things:
- flag areas where things are crystal clear to help beginners with their tax affairs (i.e. CGT on purchases and disposals, there is full clarity here and clear directions from Revenue)
- identify more complex areas, see if someone can find relevant and credible guidance for everyone’s benefit, and if not at least keep in mind this is an open question

Rob2D

kippy wrote: »

The technology might be but it's not the technology that is being taxed. It is the individual.
You don't think revenue deal with complex situations on a regular basis?

If the technology becomes a problem guess what happens?

But the individual can obfuscate and control that technology if skilled enough.

And if you're suggesting they'll ban any of this I think you're being very naive. Crypto and blockchain is a genie taken out of the bottle. And it's NEVER going back in.

Torrents became a problem once too years ago. But guess how I watched Game of Thrones? Silk Road? There are numerous Dark Net markets now. And you don't need to be a whiz kid to do any of it.

No, this stuff is here to stay and the Revenue better get their act together because they're already getting left behind.

kippy

Rob2D wrote: »

But the individual can obfuscate and control that technology if skilled enough.

And if you're suggesting they'll ban any of this I think you're being very naive. Crypto and blockchain is a genie taken out of the bottle. And it's NEVER going back in.

Torrents became a problem once too years ago. But guess how I watched Game of Thrones? Silk Road? There are numerous Dark Net markets now. And you don't need to be a whiz kid to do any of it.

No, this stuff is here to stay and the Revenue better get their act together because they're already getting left behind.

If thats what you believe. Fair enough.

Interesting take on the crypto tax situation here which goes a bit beyond CGT: https://doylekeaney.ie/news/crypto-assets-high-level-irish-tax-considerations/

In particular, it is the only source I have came across which gives a clear opinion on crypto received from staking as well as crypto lending platforms (i.e. interests from Celsius, Nexo, BlockFi, Crypto.com Earn, etc).

“Passive income derived from the staking or lending of crypto-assets would be subject to income tax rather than CGT (similarly to interest income or dividend income from conventional investments).”

Hi folks, just a quick question; If you were to invest an amount of money into BTC, and 6 months later withdraw same amount of fiat back to your bank account. In that 6 months, BTC value doubles and you have same amount of BTC as originally bought left in your wallet. Are you liable for CGT on the fiat back to your bank account, as its the same and not more as originally invested? Many thanks.

namenotavailablE

Yes- you would have a chargeable disposal for CGT (presumably) purposes.
You'd calculate the gain as the difference between the sales proceeds and half of the original cost of the BTC. There's the annual exemption of €1270 to deduct to get the taxable amount.

namenotavailabl wrote: »

Yes- you would have a chargeable disposal for CGT (presumably) purposes.
You'd calculate the gain as the difference between the sales proceeds and half of the original cost of the BTC. There's the annual exemption of €1270 to deduct to get the taxable amount.

thanks

namenotavailabl wrote: »

Yes- you would have a chargeable disposal for CGT (presumably) purposes.
You'd calculate the gain as the difference between the sales proceeds and half of the original cost of the BTC. There's the annual exemption of €1270 to deduct to get the taxable amount.

Surely depositing the same amount back to the bank account would avoid any red flags though?

Mellor

Lorne Malvo wrote: »

Surely depositing the same amount back to the bank account would avoid any red flags though?

No really. As everyone would be aware that during 6 months you can profit on investments.

The flag is raised really once you invest.

Mellor wrote: »

No really. As everyone would be aware that during 6 months you can profit on investments.

The flag is raised really once you invest.

There must be some loopholes to avail of though...legal of course.

namenotavailablE

The situation you outline shows that a gain was made on the sold BTC- you recovered your total investment but still have half of the original BTC. It's that gain which is taxable.

namenotavailabl wrote: »

The situation you outline shows that a gain was made on the sold BTC- you recovered your total investment but still have half of the original BTC. It's that gain which is taxable.

Yea I understood, thanks

Mellor

Lorne Malvo wrote: »

There must be some loopholes to avail of though...legal of course.

At some point during the year. You could withdraw
€1,270 Profit plus the underlying investment. And immediately reinvest it.
That would attract no tax liability. But superficially increases you cost to acquire.

dougal0691

Mellor wrote: »

At some point during the year. You could withdraw
€1,270 Profit plus the underlying investment. And immediately reinvest it.
That would attract no tax liability. But superficially increases you cost to acquire.

you would need to reinvest in something different though? I was told here before that if you cash out to avail of the 1270 allowance per year, that you need to wait 30 days before reinvesting in the same asset?