nav[aria-label="Primary Navigation"] { padding: 0; & ul { list-style: none; width: 100%; display: flex; flex-direction: row; justify-content: start; align-items: start; gap: 30px; padding: 0; & li { margin: 0; } & ul li { list-style: none; } } }

Child Item

Crypto tax situation - Read post 1 for thread banned users

Gooey Looey

What is the tax situation?
I've started adding loose change towards crypto and have at times made some nice little earners along with building up some savings. I know I'm supposedly liable for capital gains tax if I turn a decent profit but I'll be leaving it as crypto, not looking to convert back into Fiat at this time.

Threadbanned users:
Hellotonever

Find more posts tagged with

Quick Links

Comments

Mellor

dougal0691 wrote: »

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?

No. I don’t believe that’s correct. Gains are assessed on a FIFO (first in first out) basis. In the above there in only one chargeable event.

What you might be confusing it with is that if you buy and sell an asset within 4 weeks. It bypasses the FIFO rule. And any loss is not a simile for offsetting.
But that doesn’t apply to the above.

dougal0691

Mellor wrote: »

No. I don’t believe that’s correct. Gains are assessed on a FIFO (first in first out) basis. In the above there in only one chargeable event.

What you might be confusing it with is that if you buy and sell an asset within 4 weeks. It bypasses the FIFO rule. And any loss is not a simile for offsetting.
But that doesn’t apply to the above.

I went back and found where I was told you had to wait 30 days.
bed and breakfasting is what it's called.
https://www.lifetimefinancial.ie/tax-saving-tips-managing-stocks-shares/#:~:text=%E2%80%9CBed%20%26%20breakfasting%E2%80%9D%20means%20selling,the%20Capital%20Gains%20Tax%20liability.

this would be very risky to do with crypto being so volatile.

Bob24

dougal0691 wrote: »

I went back and found where I was told you had to wait 30 days.
bed and breakfasting is what it's called.
https://www.lifetimefinancial.ie/tax-saving-tips-managing-stocks-shares/#:~:text=%E2%80%9CBed%20%26%20breakfasting%E2%80%9D%20means%20selling,the%20Capital%20Gains%20Tax%20liability.

this would be very risky to do with crypto being so volatile.

I have seen this mentioned in many places as well, but the revenue website and their CGT documentation don’t seem to back it so I am not too sure.

What’s for sure is that what Mellor mentioned does apply. See here under the section “Shares sold within four weeks of acquisition”: https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/selling-or-disposing-of-shares.aspx

This was probably introduced in order to prevent frequent traders from accruing short term losses and offsetting them then against CGT (which is a way to penalise them).

But actually in the context of crypto I think it can sometimes turn to the advantage of the taxpayer.

For exemple, if you are receiving income in crypto from lending, staking, or mining ... as long as you dispose of the crypto within 4 weeks you are overriding the FIFO rule and thus probably saving a lot on CGT (because the cost base to calculate CGT is the price on the day you received that income rather that a probably much lower price from previous purchases you made months or years ago). Note that in this scenario you also need to pay income tax so you are still getting hammered with tax, but at least CGT is rather low.

Mellor

dougal0691 wrote: »

I went back and found where I was told you had to wait 30 days.
bed and breakfasting is what it's called.
https://www.lifetimefinancial.ie/tax-saving-tips-managing-stocks-shares/#:~:text=%E2%80%9CBed%20%26%20breakfasting%E2%80%9D%20means%20selling,the%20Capital%20Gains%20Tax%20liability.

this would be very risky to do with crypto being so volatile.

It is called Bed and Breakfasting.
A rule was introduced to prevent it in the UK. I can find no such rule on Revenue.ie guide to CGT. As far as I can see it’s a valid strategy in Ireland. Open to correction of course, I’m not a tax accountant.

https://www.paylesstax.ie/sale-of-shares-tax-saving-tips/#.W2iJP-DTV-E

The Irish rule is the one I outlined above, which only applies to offsetting losses against gains, and immediately re-purchasing.

Mellor

Bob24 wrote: »

But actually in the context of crypto I think it can sometimes turn to the advantage of the taxpayer.

For exemple, if you are receiving income in crypto from lending, staking, or mining ... as long as you dispose of the crypto within 4 weeks you are overriding the FIFO rule and thus probably saving a lot on CGT

That wouldn’t actually save you anything long term though. If would just delay the CGT until the next year. A you dispose the expensive coins and hold the cheaper ones - thus increased future gains for CGT purposes.

punch bob

I heard that swapping from one coin to another is a taxable event - which is a pain since many cryptos have no trading pair with EUR hence you trade using X/USDT before getting your desired coin. I have traded several using EUR/USDT pair and of course selling USDT right away to get my coin.

Can I not declare it this year and do so when I finally get my profits in EUR? I have sold a bag of crypto with a loss as well. If I skip declaring it this year, will I get penalised for doing so?

Bob24

Mellor wrote: »

That wouldn’t actually save you anything long term though. If would just delay the CGT until the next year. A you dispose the expensive coins and hold the cheaper ones - thus increased future gains for CGT purposes.

Saying the above, you are assuming that crypto will only go up* and that the person will be a tax resident in Ireland forever, which are not minor assumptions (and also even with this assumptions the deferral can be much more than a year if there are no further disposals). For exemple, if someone is going to leave Ireland in a few years and moves to a tax regime with no CGT, lower CGT, or "simple" FIFO based CGT (without the Irish 4 weeks exception), they could actually save on taxes by doing what I mentioned because that Irish tax they have deferred will actually never be due and there will be lower or no tax at all with their new tax residence.

But yes of course, assuming prices goes up and the person remains a tax resident here, this is about tax deferral rather than tax avoidance.

Even in this scenario it is still a nice benefits though (since our crazy high CGT goes a long way into killing compounding effet of investments, any way to delay it is good to take). For exemple, if someone wants to dispose of interests/staking/mining crypto income to spend them in fiat or invest them into another crypto / asset class, it is a good thing that it can be done without crystallising gains on crypto which was purchased years ago at a much lower price, because any tax amount which is deferred can be reinvested in the meantime and generate yield.

* or that if it goes down the investor will necessarily have gains to offset future losses against.

Bob24

punch bob wrote: »

I heard that swapping from one coin to another is a taxable event - which is a pain since many cryptos have no trading pair with EUR hence you trade using X/USDT before getting your desired coin. I have traded several using EUR/USDT pair and of course selling USDT right away to get my coin.

Can I not declare it this year and do so when I finally get my profits in EUR? I have sold a bag of crypto with a loss as well. If I skip declaring it this year, will I get penalised for doing so?

Any crypto swapped for another crypto in 2020 is part of you 2020 CGT liabilities . I.e. it needs to be declared in 2021.

Mellor

Bob24 wrote: »

Saying the above, you are assuming that crypto will only go up* and that the person will be a tax resident in Ireland forever, which are not minor assumptions (and also even with this assumptions the deferral can be much more than a year if there are no further disposals). For exemple, if someone is going to leave Ireland in a few years and moves to a tax regime with no CGT, lower CGT, or "simple" FIFO based CGT (without the Irish 4 weeks exception), they could actually save on taxes by doing what I mentioned because that Irish tax they have deferred will actually never be due and there will be lower or no tax at all with their new tax residence.

But yes of course, assuming prices goes up and the person remains a tax resident here, this is about tax deferral rather than tax avoidance.

The compounding interest point is a valid one. As you can profit on the deferred tax.

Of course all this only applies if you holding, mining, and disposing the same coin.

punch bob wrote: »

.
Can I not declare it this year and do so when I finally get my profits in EUR? I have sold a bag of crypto with a loss as well. If I skip declaring it this year, will I get penalised for doing so?

If you’ve made a loss this year. That can be offset from and profits. Say the loss was €2k and you made €3k profit. You’d definitely want to declare all of that. As the loss combined with the exemption. Means you’d have zero tax liability. And increased your acquisition price for tax purposes.

Rob2D

Bob24 wrote: »

Any crypto swapped for another crypto in 2020 is part of you 2020 CGT liabilities . I.e. it needs to be declared in 2021.

But in terms of just acquiring, you didn't realise any gains from it though??? Like if you bought BTC in order to swap for something else straight away, you didn't gain or lose anything. I was just simply a bridge.

I reckon if you just record it in your portfolio as x amount of €'s for x coin and don't bother mentioning the BTC bridge at all, then the revenue won't ever know or even care.

Bob24

Rob2D wrote: »

But in terms of just acquiring, you didn't realise any gains from it though??? Like if you bought BTC in order to swap for something else straight away, you didn't gain or lose anything. I was just simply a bridge.

I reckon if you just record it in your portfolio as x amount of €'s for x coin and don't bother mentioning the BTC bridge at all, then the revenue won't ever know or even care.

Yes in a the specific scenario whereby you acquire BTC and *immediately* convert that exact amount into another crypto (i.e. the price of BTC hasn't changed between both transactions), you don't have any CGT liability as there was not profi (you are still meant to report that transaction to Revenue though, as even though there was no gain it is a disposal).

However, if we are talking about BTCs which were purchased months or years ago and which are being converted into another crypto today - this would trigger a CGT liability for 2021.

timeToLive

Bob24 wrote: »

Yes in a the specific scenario whereby you acquire BTC and *immediately* convert that exact amount into another crypto (i.e. the price of BTC hasn't changed between both transactions), you don't have any CGT liability as there was not profi (you are still meant to report that transaction to Revenue though, as even though there was no gain it is a disposal).

However, if we are talking about BTCs which were purchased months or years ago and which are being converted into another crypto today - this would trigger a CGT liability for 2021.

EDIT: removing some info in this post as the following two posters have the correct information

Mellor

Rob2D wrote: »

I reckon if you just record it in your portfolio as x amount of €'s for x coin and don't bother mentioning the BTC bridge at all, then the revenue won't ever know or even care.

If you ever get audited, you need to show the actual transactions.

timeToLive wrote: »

And to add to this.. I think* if you bought BTC a year ago and then buy some more BTC and instantly convert it to something else, your tax liability is based on the first bitcoin you bought and the profit from that (FIFO - first in first out)

Nope.

The FIFO rule suspended for assets bought and sold within 28 days. Precisely for that reason.

Bob24

timeToLive wrote: »

And to add to this.. I think* if you bought BTC a year ago and then buy some more BTC and instantly convert it to something else, your tax liability is based on the first bitcoin you bought and the profit from that (FIFO - first in first out)

* I'm not an accountant so could be wrong

As Mellor said, if the same asset is acquired and disposed of within 4 weeks, FIFO does not apply.

See section 6A.3.1 here: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-19/19-04-06a.pdf

So if you buy BTC and instantly convert it to something else (i.e. the BTC price hasn’t had time to change), then you can’t possibly have any CGT liability and your “old” BTC from a year ago still represents a gain to be realised in the future.

timeToLive

Mellor wrote: »

If you ever get audited, you need to show the actual transactions.

Nope.

The FIFO rule suspended for assets bought and sold within 28 days. Precisely for that reason.

Bob24 wrote: »

As Mellor said, if the same asset is acquired and disposed of within 4 weeks, FIFO does not apply.

See section 6A.3.1 here: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-19/19-04-06a.pdf

See if you buy BTC and instantly convert it to something else (i.e. the BTC price hasn’t had time to change), then you can’t possibly have any CGT liability and your “old” BTC from a year ago still represent a gain to be realised in the future.

Thank you!!

jonny_b

If you can't provide receipts say for instance you invested €500 and made a profit of 60k. You knew it was a €500 investment but we're happy to pay the 33% CGT on the €60500. Is that what would generally happen if you can't provide proof?

Donegal1234

jonny_b wrote: »

If you can't provide receipts say for instance you invested €500 and made a profit of 60k. You knew it was a €500 investment but we're happy to pay the 33% CGT on the €60500. Is that what would generally happen if you can't provide proof?

Just use https://koinly.io/ which I use.Recommend by the revenue aswell. Can login with your Coinbase account.

Bob24

jonny_b wrote: »

If you can't provide receipts say for instance you invested €500 and made a profit of 60k. You knew it was a €500 investment but we're happy to pay the 33% CGT on the €60500. Is that what would generally happen if you can't provide proof?

I am not sure at all, but I think they might have a problem as if you are selling 60000 worth of BTC but can’t prove when/how you obtained it, they could suspect that you’re involved in money laundering or that you received the BTC as a way to dodge other taxes (for exemple income tax or VAT - someone could have handed those BTC to you 2 weeks ago as a payment for some job you did for them and behind the back of the taxman).

I assume that if you are engaging with them and being upfront they’ll figure out something though.

jonny_b

Bob24 wrote: »

I am not sure at all, but I think they might have a problem as if you are selling 60000 worth of BTC but can’t prove when/how you obtained it, they could suspect that you’re involved in money laundering or that you received the BTC as a way to dodge other taxes (for exemple income tax or VAT - someone could have handed those BTC to you 2 weeks ago as a payment for some job you did for them and behind the back of the taxman).

I assume that if you are engaging with them and being upfront they’ll figure out something though.

Nah I used koinly there thank OP. No CGT liable well at least not yet. That was just an example I used. Waiting for theta to rise to be liable for CGT lol

Mellor

jonny_b wrote: »

If you can't provide receipts say for instance you invested €500 and made a profit of 60k. You knew it was a €500 investment but we're happy to pay the 33% CGT on the €60500. Is that what would generally happen if you can't provide proof?

If you couldn't prove it wasn't just sent to you or inherited somehow.
Then you might have to declare there lot as a gain.
20,000 vrs 20,165 owing. I wouldn't be spending too much of my time fighting it

Peregrinus

jonny_b wrote: »

If you can't provide receipts say for instance you invested €500 and made a profit of 60k. You knew it was a €500 investment but we're happy to pay the 33% CGT on the €60500. Is that what would generally happen if you can't provide proof?

Unlikely with a crypto transaction that you couldn't produce any documentation to corroborate your story of how you acquired the crypto - presumably you have an account with a crypto exchange or other intermediary, and a record of your transactions on that account can be generated.

But, hypothetically, if you have sold an asset for €60k, claim that you acquired it for €500, and have no evidence to corroborate this, they are likely to accept your story, because this is clearly not a story invented to minimise your tax liablity. If your claim was that you acquired it for €50k, now, and so only have a €10 gain, they'll give you a hard time.

Mellor

Peregrinus wrote: »

... presumably you have an account with a crypto exchange or other intermediary, and a record of your transactions on that account can be generated.

The account that purchased the crypto may no longer exist.
It's not unreasonable to aggregate all purchases into on exchange or wallet. If you closed an old account, records may be lost.

Peregrinus

Mellor wrote: »

The account that purchased the crypto may no longer exist.
It's not unreasonable to aggregate all purchases into on exchange or wallet. If you closed an old account, records may be lost.

That's true.

In which case, if you paid real money to acquire your crypto and want to treat that as a cost of acquisition to reduce your CGT liability on eventual disposal, for the love of God print off and keep a full transcript of your account before you close it. The Revenue are not going to deal sympathetically with a taxpayer who has no records of his acquisition costs because he deleted them.

Mistermu

Bob24 wrote: »

If he is still working here, he definitly is a tax resident (or ordinarily resident). But this isn't the only deciding factor.

I don't want to give direct tax advice and your friend should satisfy himself that he understands the tax rules and act accordingly, but the following quotes from this document should give directions (as you can see, being "domiciled" in Ireland or not does make a difference):

Has anybody been in touch with a tax advisor in relation to the remittance basis of taxation being applicable to cryptocurrencies for non domiciled residents?

Bob24

meanpeoplesuck wrote: »

Does the "8 year rule" apply to crypto in Ireland?

Eg. If you bought BTC in 2013, you'd have to pay CGT of 33% on all of it in 2021 even if you only want to sell a tiny amount?

I assume you are referring to the deemed disposal and exit tax legislation?

If yes, the tax is actually 41% every 8 years even when you don't dispose of the asset. But it only applies to mutual funds and ETF type of products.

I.e. not to individual crypto holdings. It would only apply of you bought shares in a fund/ETF/ETP/ETN filled with crypto and which is domiciled in the EEA (there are now some, but they wouldn't have existed 8 years ago).

meanpeoplesuck

Thanks Bob.

That's exactly what I was asking about.

So it's possible to sell a portion of your crypto, pay your taxes, and be fully compliant. But you still have the rest of your holdings untouched.

Appreciate the information!

Bob24

meanpeoplesuck wrote: »

Thanks Bob.

That's exactly what I was asking about.

So it's possible to sell a portion of your crypto, pay your taxes, and be fully compliant. But you still have the rest of your holdings untouched.

Appreciate the information!

No worries.

Yes for sure. If you are only selling a portion of your holdings, you only pay CGT on that portion.

The FIFO rule applies to match what you are selling with what you had bought in the past and calculate your gains (except if you are buying and selling within 4 weeks in which case there is an exception).

And for your reference if you have ETFs the exit tax is due every 8 years no matter what (even if you aren’t selling anything). This is a crazy tax but that’s the law.

actuallylike

So it appears that staking returns is a kind of grey area, but is the action of staking itself taxed? Lots of tokens take this x model, where you deposit your token and receive an interest bearing token in return (e.g. Stake SUSHI, receive xSUSHI in return). It looks like it could be considered a swap of sorts.

Is this transfer of assets considered a taxable event as it appears you're disposing of an asset (the SUSHI) .

So, if I bought SUSHI at $2 and then started staking it when it was $15, do I now owe tax on the $13 gain? If so, it makes DeFi completely unusable if there's a huge tax for nearly every token movement within defi.

Mellor

I’d say no as you still own the SUSHI. It’s never disposed of.

actuallylike

Mellor wrote: »

I’d say no as you still own the SUSHI. It’s never disposed of.

I don't think I do own the SUSHI though, xSUSHI and SUSHI are two different ERC20 tokens, albeit someway pegged to each other?

For example, I can borrow xSUSHI from protocols like AAVE using collateral that isn't SUSHI, so there is ways of obtaining xSUSHI without having SUSHI.

I can also swap my xSUSHI for something other than SUSHI, which looks like another disposal of an asset.