Crypto tax situation - Read post 1 for thread banned users

actuallylike wrote: »

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.

There are many ways to obtain tokens and coins. But your example didn't involved those other ways, you said;

actuallylike wrote: »

So, if I bought SUSHI at $2...

So in that example, you bought sushi. Why would you not own it.

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

Of course you can. You can trade for another token, or for fiat. From when you own it it's treated like any other asset you own.
But that's outside of the scope of the question about staking.

Bob24 wrote: »

There is no CGT because you never disposed of anything, and there is income tax due on the reward amount you received.

I don’t think that’s correct.
Mining is subject income as it’s providing a service for payment. Agree there.

But staking/holding/depositing on a platform is not performing a service for payment. It’s just holding in a way that earns a reward.

The closest parallel would be bonus shares. Where holders of existing shares are rewarded bonus shares they are subject to CGT, not income tax.

I still think revenue has to solidify it that crypto is a security.
But it’s that’s their angle, they it should apply acrid the board. Can’t pick and choose imo.

It could also be called interest on some platforms but I am using the generic word reward on purpose, as to my understanding from Revenue's perspective this is subject to income tax rather than DIRT

Dirt is only payable with financial institutions. I can’t see how it could currently apply to crypto.

Bob24 wrote: »

Agree Revenue should really clarify their position, but Koinly as well as a tax firm guidance posted on the thread before are saying this is subject to income tax.

Koinly has no bearing on the Irish tax though.
There’s literally a page on revenue describing now bonus shares/securities are retreated.

I can’t see how they can justify waiving that in regards to crypto so as to charge a higher tax. Revenue said there are no special rules for crypto.

The way I see it, the service you are providing is that you are lending your crypto to someone and in exchange they are paying you compensation for the service

That’s exactly how the entire banking system works. If that counted as a service for income, then term deposits, savings accounts should be subject to income tax. But they aren’t.

So if Revenue was considering the likes of Celsius and BlockFi as financial institutions paying interest on deposit accounts for the purpose of tax liabilities, DIRT would be due..

If they were to take that view they’d collect dirt on staking. And lose CGT due on the “deposits”. It’s one or the other.

Securities that attract DIRT are the likes of government bonds that pay interest.
Stock dividends are classed as income.

The parallel to crypto would be token/staking that paid interest in fiat - at in that case it wouldn’t attract CGT.

I assume income tax is >33% for most investers, so I wouldn’t be going out of my way to declare my holdings as crypto.

actuallylike wrote: »

Maybe instead of bought, we should say swap. Say I swapped ETH for SUSHI on uniswap. afaik, I owe cgt on the difference of the ETH at the point of swap and the point from when I bought the ETH.

Yes. You have disposed of your ETH. A swap is basically a trade.

When I stake my SUSHI, I receive xSUSHI, not an NFT, a brand new ERC20 token. I don't see the difference between staking in this scenario and swapping on uniswap. They both result in a disposal of an asset, because I don't have the SUSHI anymore, I have a brand new independent token (xSUSHI).

Say after 6 months you decide to unstake. You get your sushi back.
Staking is not a disposal. You still own the sushi.

If cgt is not applicable at this point, what about if I swap my xSUSHI on uniswap (which I'm able to do). Say I swap.it immediately after staking. If my first paragraph is right, my gains since I obtained the xSUSHI is effectively nil, because I've just obtained it. Is that way to avoid the cgt on the SUSHI? Surely not.

A swap is a trade. If you immediately trade for xsushi, you don’t make a gain on the xsushi. So no CGT.
But you still have a sushi. Whenever you unstake and dispose you’ll owe CGT on gains.

I probably have to pay cgt on the gain from when I first bought the btc right?

Yes. We just discussed this in the other thread.
It’s liable for CGT. But swapping just enough to step under the allowance would mean acquisition costs increase without CGT liability.

namloc1980 wrote: »

Is there a definitive Revenue view on the interest earned on crypto on the lives of Blockfi/Celsius?

Nope there isn’t unfortunately.

Legal advice here stating that “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)”: https://doylekeaney.ie/news/crypto-assets-high-level-irish-tax-considerations/

And also Koinly (which has an Ireland-specific tax engine for crypto transactions which they build based on legal advice here) are reporting BlockFi/Celsius/Crypto.com interests as liable for income tax on the tax reports they produce.

As you might have seen on the thread some posters will disagree and have different views, but I haven’t seen anyone posting more credible sources than the above 2 which would be addressing this specific point and stating something different. It would really be better if Revenue could clarify though as while those are opinions by tax professionals, they are not based on any official document. Saying that there is no specific tax rule for cryptocurrencies as Revenue have been doing really isn’t enough. It is all fine for basic stuff like CGT on simple purchases and disposals, but there are some things you can do with crypto which don’t always have a clear equivalent with other asset classes.

I guess someone could raise an inquiry on the Revenue website and ask, but based on previous experience I wouldn’t hold my breath for a clear answer (I suspect after weeks of waiting for an answer they would just come back with a vague statement which isn’t committing them to anything, along the lines of “there is no specific tax treatment for cryptocurrencies and the usual tax rules apply”).

Traditional securities can generate payments to the holders which may in some circumstances be in the nature of income - dividends, interest - and in some in the nature of capital - bonus issues. It's the nature of the payment that matters, not the form in which it is made. Where the payment is periodic, like interest and ordinary dividends, or where is represents a distribution of profit or earnings which are themselves income in the underlying enterprise, then it's of the nature of income. But where it represents a distribution of capital, then it is of the nature of capital. And, yeah, there can be grey areas and doubtful cases.

So, there's no a priori reason why payments made to the holders of crypto should necessarily be income, or necessarily be capital. They can by either, depending on the nature of the payment. Whether the payment is made in fiat, in crypto or in kind is unlikely to determine the issue; a much more relevant consideration is why the payment is being made and how it is being funded.

People arguing for particular (and invariably favourable) tax treatment for crypto always focus on the ways in which crypto differs from other investments. I suspect that this approach is driven by wishful thinking. If you're trying to work out what view the revenue will take of a particular transaction or event involving crypto, the better course is not to focus on the ways in which that transaction/event differs from transactions/events involving more conventional investments, but on they ways in which it resembles them. That's probably going to give you a better guide as to how the revenue will think.

Bob24 wrote: »

Agree, and even though as you say it is unlikely to make a difference, interest on crypto deposits aren't necessarily paid in the same crypto anyway. They could be paid in anything (including the same crypto as the deposited amount, another crypto, or even possibly a fiat currency).

Genuine question: is there much of a lending market in crypto? Does it happen on a sufficient scale for us to be able to identify prevailing interest rates for various different cryptos? Who borrows crypto, and what for?

Bob24 wrote: »

While I agree with this, I think it isn't always easy to put in practice and sometimes there are things going-on in crypto (especially related to De-Fi) for which it is hard to find an equivalent elsewhere (at least at an individual level - as DeFi tends to bring to the masses concepts which previously only applied to institutional entities, which are subject to different tax treatment). So some things are unfortunatly up for interpretation.

I think the first challenge is to understand what the transaction is. I do sometimes get the impression that people post on this forum enquiring about the tax treatment of various crypto-based transactions which they themselves do not understand, or at least which they struggle to explain. Of course the problem could be me, not them.

But the bottom line here is that when transactions are novel, in order to think about the tax treatment the first thing you need is a clear understanding of exactly what the transaction entails, and that understanding has to be shared by everyone in the conversation. Otherwise you're going nowhere fast.

Peregrinus wrote: »

People arguing for particular (and invariably favourable) tax treatment for crypto always focus on the ways in which crypto differs from other investments. I suspect that this approach is driven by wishful thinking.

I understand that you’d suspect that. But in this case I am actually arguing the opposite. In that crypto should be treated as other securities are.
Additional tokens issued to token holder who have staked are by their nature more in line with bonus issues.
But this depends on the mechanics of the issue I guess

Interest is case iii income and subject to income tax. I'm not really sure how this is even a point for discussion.

Bob24 wrote: »

Yes, for me what is more open for discussion is when you take part in a DeFi liquidity pools. I.e. is it considered that you are actually forfeiting your assets to the liquidity pool in exchange for other assets in which case there could be CGT. Or that since you kind of have a guarantee that you can recover your original assets, it effectively is a deposit to the pool which is attracting income? I think this is very much open for discussion as I find it hard to identify similar transactions that individual taxpayers would make outside of DeFi.

But IMO it is pretty clear that regular rewards related to simple deposits on the likes of Celsius, BlockFi, or CDC don’t constitute asset price appreciation and are rather payments made to you by those services as profit-sharing related to them lending-out assets on your behalf. I am keeping an open mind for official of credible sources saying otherwise, as Revenue could have a strange view on this and at the end of the day their view is what matters, but I haven’t seen any to date (quite the opposite - the few legal opinions have I seen are all backing my personal understanding).

You could possibly argue that's it's schedule d case IV income but it's still subject to income tax.

namloc1980 wrote: »

Any thoughts on free crypto rewards? I did some quiz thing on coinbase and got about €20 in free crypto (Compound/Amp). Is that income for tax purposes or what? And what happens if, in theory, those increased in value a lot.....CGT then if I sold them but what would be the cost basis? Would it be €0?

Just an opinion, but the way I see it is that:
- as long as it is a relatively small amount, it can be considered a gift received as part of a commercial offer (similar to an Irish bank giving cashback on card payments or paying a reward bonus to switch account or mortgage with them). I could be mistaken, but my understanding is that no income tax is due on this type of commercial offer (nor any other tax).
- however, even though it is gifted to you, this is an asset you are acquiring, and your acquisition value for CGT purposes is the fair market value at the time you received it. Whenever you dispose of the asset, the usual CGT rules apply based on that acquisition value and your disposal value, and CGT is due if there is capital appreciation. If you are selling it immediately after receiving it, there is no CGT due, as the acquisition and disposal values are the same and the 2 transactions can be matched (even if you have older reserves of the same crypto, as the disposal transaction occurs within 4 weeks of the acquisition).


For reference, what I described above is the exact way Koinly are treating cashback on Crypto.com and Binance cards on their tax reports.

Looking for some guidance here.

Back in January I invested in a crypto that did very well, Matic. Foolishly I converted a large chunk of it to another crypto and converted some to FIAT which I cashed out to deposit to Binance. Reason being is the crypto I wanted wasn't available on the exchange I bought my Matic.

I think I'm now susceptible to paying a large tax bill on gains even though I've essentially reinvested most of these in another crypto. In order to avoid that, would I be better off investing that figure in crypto to offset these gains i.e. spend $5k on stocks/crypto to avoid paying $5k in tax?

It was my first foray into proper trading and I made a bit of a mess of it, I think.

Thanks for that. I have acquired another crypto since, and it has dropped a bit in value of the last few months, but not sure if I want to get rid of it tbh as I think it will blossom at some point.

Not sure what your new asset is but, if there's a wrapped version of it, you could swap it for that to take the tax loss. That way you won't have to wait a month to repurchase.

So BTC-->wBTC or MATIC-->wMATIC etc

The artists’ exemption is an exemption from income tax, not from CGT.

But . .

You pay CGT if you buy something and then later sell it for more than you paid for it. (Simplified version, but close enough). If you make something and then sell it, that doesn’t attract CGT; it attracts income tax. 

So, if I write novels or paint pictures or whatever for a living, the income I get from that would be subject to income tax, were it not for the artists’ exemption.

But . . .

If I have a bunch of crypto that has appreciated hugely in value, if I spend it buying something that is a disposal, and I’m liable to capital gains tax on the gain that I realise when I dispose of the crypto. That doesn’t change if the thing I buy is a creative work of art. It also doesn’t change if I also work as an artist, and earn money by writing novels, painting pictures or creating rinky-dink NFTs. The money I earn by selling novels, paintings and NFTs is exempt from income tax, but the gains I realise by acquiring, holding and disposing of crypto are not exempt from CGT.