Okay let me give you another scenario. Say I don't sell anything and don't reinvest but acrue gains of 3k over three years, then I sell. I'd be liable for tax on 1730 of that right? Because its a single taxable event that year?
A further point on high CGT rates:
Ireland does have high CGT rates, as Bob24's post illustrates. But, swings and roundabouts; Ireland's overall tax burden as a percentage of GDP (GNP* for Ireland) is pretty much the EU average, which means that we have other taxes that are below average. Our "taxes on production and imports" (VAT, excise duties) are pretty close to the EU average; the below-average taxes are "net social contributions" (social insurance contributions and contributions to pension funds, basically).
So I think crypto enthusiast who call for lower CGT (either for crypto, or generally) need to think about what other taxes could or would be raised. The likely answer is, social insurance contributions of one kind or another. So this would be a call for employers and employees to pay higher taxes so that crypto investors could enjoy lower taxes. It's a hard sell, politically.
Obviously having a high CGT rate, low annual allowance, etc, does maximise the incentive for Irish residents with large accrued gains to relocate to avoid CGT.
A number of factor work the other way to reduce the incentive. The main one, in this context, is that you can’t necessarily avoid Irish CGT by leaving Ireland and realising your gains the next day.
- If you have been resident in Ireland for 3 or more years then you are “ordinarily resident”. If you are ordinarily resident you are chargeable to Irish CGT on your gains.
- To lose ordinary residence you have to be not resident in Ireland for 3 or more years.
- So, to use emigration to avoid Irish CGT, you need to be out of the country for three years before you dispose of your asset.
That doesn’t suit active traders, who obviously don’t want to freeze all trading for three years. It doesn’t suit people who want to cash out and take the money now. And, of course, it doesn’t suit people who are not confident that, in three years’ time, their crypto will still be worth the squillions that it is worth today. So these groups, all of whom are quite large, are not really motivated to emigrate. The incentive to emigrate is not perhaps as high as some in this thread have suggested.
Still, there’s some incentive to emigrate. But should that bother us? The downside for us, should they emigrate, is that we don’t get the tax on their gain. But that’s hardly an argument that we shouldn’t tax their gain so that they won’t emigrate. Is there any other downside? It’s not as though they are engaged in a socially useful activity, or making a great contribution to Irish society, as people speculating in crypto; their activities confer shag all benefit on the rest of us. We should be worried about the emigration of nurses or teachers or engineers before we worry about the emigration of crypto speculators.
Not saying that high Irish rates of CGT aren’t an issue we need to look at, and don’t cause problems. But, seriously, the emigration of crypto speculators triggered by Irish CGT rates is pretty low down on the list of problems to which we should be devoting our attention.
[And, no, I don’t think there is a way to part-quote a post. It’s one of the many, many ways in which the recent “upgrade” has degraded boards. But that’s for another forum.]
Been investing/trading since 2016 on an old exchange, and not kept a single record on that account. It contains a sizeable amount of crypto and probably has 80-100 trades, I was young back then and didn't understand the whole tax thing. I did it as a hobby.
Sieving though every trade I did years ago will be an absolute nightmare, is there any way around this? Can't I just 33% the total profit and hope for the best? How likely are they to ask for proof? Revenue will see the large deposit in my account anyways and basic math will all add up and correlate with what I would declare. Thanks.
Sorry, I mis-read your post originally. But once your gain is less than €1,270 in the year, I can’t see how your not in the clear tax wise
Let's say I bought 2k worth of crypto and sold it for 3k, but then instantly reinvest it, does that 1k count towards my CGT tax allowance? So in future I won't be taxed on that 1k gained? I'm thinking if I did that every year, I could get around around CGT in small increments.
As far as I know, your gains should be calculated as the EUR value on the day of disposal minus the EUR value on the day of purchase (even if the actual transactions were settled in GBP).
I have bitcoin purchased years ago using my UK bank account, so using pounds.
I now live/work in Ireland, I will be cashing out the crypto to my UK bank account but should I simply convert the final taxable figure to Euro for revenue or go back and convert the sterling transaction to euro on that day using the exchange rate on that day? ...
Yeah it's not just the high CGT rate in Ireland but also the poor exemptions and archaic tax system in a lot of ways. It's the single biggest issue stopping me moving back to Ireland anyway. Just because it's been done like that for years doesn't mean that's a good thing. Crypto friendly countries are going to take a lot of younger talent over the next few years if more established countries are slow to adopt change.
On the fact that the incentive to leave the country because of CGT has always existed since the tax was introduced. Technically yes, but it has to be said that every time the rate was increased, that incentive was also increased.
At this point, Ireland clearly is a high CGT country in a European context (and thus in a global context as Europe tends to have the highest rates). If this is what the majority of Irish people think is the right thing to do this is fine, but we have to be clear on the fact that our system is rather punitive (not just the rate, but also the low yearly exemption, the deemed disposal rule, the the lack of tax-incentivised investment accounts for small/medium individual investors such as ISA in the UK or PEA in France, etc).
PS: is there still a way to only quote and outline a small section of a post instead of quoting the whole thing? (I might be missing something but I can't figure it out.
Thanks.
I understand what you mean, that it's taxed the same as every other asset, a gain of €10m is a gain of €10m, that the rules are common in many countries, and so on. The difference I see is that very few laypeople (mobile and tech savvy, at that) will have had such gains with any other asset in the past ever. So this...
"Which means that, whatever incentive CGT creates for people to leave the country, it has always created."
...is not true. The considerations of someone sitting on a bank HQ, or business person who establishes a business over 20 years say, who could take up tax residency elsewhere, are different to those of a 21 year old who blindly put a few grand into crypto a few years ago and is now a multimillionaire without lifting a finger. I understand that the flat rate of CGT applies to all, but it creates different incentives in different situations.
You say a few times that this is "not new" but I see no evidence of this. Even just looking at breakdown of CGT revenue here for the last few years, crypto seems "new". In 2019, €9B worth of disposed assets were taxable through CGT, most of it land/property/unquoted securities, resulting in about €1B revenue from CGT. €13T was traded on crypto exchanges last year. I would not be surprised if the amount traded by Irish people dwarfed all assets under consideration for CGT otherwise.
"they are not relocating to countries that have special deals for crypto; they are relocating to countries that have low or no CGT in general"
That's probably true
CGT was not conceived of as replacement for estate duty; you're thinking of CAT, a completely different tax.
The investments in the 70s were property investments. There were a number of cases of people buying up derelict properties, sitting on them during a property boom and then selling them for multiples of what they had paid, without having done any work at all; simply allowing them to deteriorate. The case that caught the public imagination, if I remember correctly, was a bank - was it AIB? - that bought up a collection of city centre properties with a view to constructing a corporate headquarters, later changed its mind and bought up abandoned cattle yards in Ballsbridge and put the headquarters there, sold off the city centre property for a stupendous gain, and avoided paying any tax on the basis that the property transactions were not undertaken in the course of their banking business. There was general public outrage that windfall gains accruing to a bank as a result simply of rom owning something at a time of rising prices would go untaxed, so CGT was introduced.
As for the incentive to leave the country: if you have a gain of €10m, the CGT on that is exactly the same regardless of whether your initial stake was €1, €1m, €10m or even €100m, and regardless of whether the gain accrued over one month, one year or ten years — it's €3.3m. It's also the same regardless of the nature of the asset; the CGT rate for gains on crypto is the same as the CGT rate for gains on fiat (which, since you ask, is comparable or superior to crypto in terms of value, transferabiilty and liquidity), gains on shares, gains on pretty well anything. You either do or do not consider that it's worth your while to uproot your life in order to save €3.3m — it's up to you. But the potential tax saving is the same regardless of how much you staked initially or how long you held the asset or (mostly) the nature of the asset you are selling; none of these considerations enter into your emigration calculation at all. Mentioning them in this context is a giant red herring.
Which means that, whatever incentive CGT creates for people to leave the country, it has always created. That has been a feature of the tax since it was introduced. If you have accrued a gain on a financial asset, it has always been possible to avoid CGT on it by moving to e.g. Portugal and becoming neither resident nor ordinarily resident in Ireland before you dispose of it. Crypto changes nothing there. Possibly with the crypto boom there are currently more people with larger gains who experience this incentive, but on the the other hand the opportunity cost to the exchequer from not taxing the gains is correspondingly greater, so I reckon that's a wash, from a public policy point of view.
I'm not sure why you think CGT in Ireland is anachronistic in this respect; as pointed out, the issue you identify is not new, and it's hardly unique to Ireland. Irish CGT, in taxing gains on crypto in exactly the same way as gains on other assets, is not unusual; SFAIK this is the international norm. If people are leaving Ireland to avoid CGT on their crypto gains, they are not relocating to countries that have special deals for crypto; they are relocating to countries that have low or no CGT in general.
You think that there's zero societal benefit to crypto, with regard to activity, employment and wealth?
I keep asking the same question: what speculative investments in the 70s, and what order of magnitude of windfall?
You guys aren't getting my point here so I suppose I'm not being clear. I don't mean that people whose wealth rockets should be let off CGT just because of the short time frame or magnitude per se.
The rate of increases in value of crypto are such that, in a very short amount of time, with no access to finance or leverage or financial instruments required, it becomes prudent to leave the country. If you start with €1000 and end up with crypto worth €10m after a year or two, it's completely senseless to draw this down in Ireland.
Secondly, the nature of crypto means that leaving the country is trivially achieved. This is already happening, people are already moving, and other countries are already incentivising people coming.
CGT in Ireland is anachronistic in the face of this RECENT DEVELOPMENT and I think it's silly that you're both trying to pretend that CGT, conceived of initially as a replacement for estate duty and which at the time mainly existed to tax the sale of land and property, is appropriate for assets that you can't be compelled to disclose, and you can "take" wherever you like without notification, and can transfer internationally in seconds without any intermediaries. Again, please cite just ONE comparable asset in terms of value, transferability, and liquidity.
So this gap in taxation (in my eyes) is non optimal for both stimulating/attracting investment, in terms of overall tax revenue, and makes the country non-competitive in the face of a massive change in the landscape of finance/tech. I've no doubt that it'll have to change, my initial question in the thread was just "when".
What Gordon said. CGT was introduced in Ireland in the 1970s precisely because people were making very large windfall gains in very short time frames through speculative investments, and avoiding tax on those gains because they weren't carrying on a trade or profession. The larger the investment windfall, and the shorter the time-frame in which it accrues, the more bizarre (to most people) is the idea that it should escape tax.
This is exactly what CGT was designed for.
So? If an asset appreciates very rapidly it should be favoured with lower tax rates?
Are high-paying jobs favoured with lower income tax rates? Does particularly expensive jewellery attract a lower VAT rate?
This - like the earlier argument based on lack of regulation - make no sense at all. Conventionally, tax rates are graduated according to ability to pay; if that principle was applied to CGT then the holders of the best-performing assets would suffer higher rates of CGT, not lower.
And, to a certain extent, this is the case in other countries, where lower CGT rates apply if you have held the asset for longer. So if Irish CGT were designed to afford special treatment to assets that yield enormous gains in a short time frame, it would likely subject them to higher rates, not lower rates.
I'm genuinely astonished at the suggestion that investment in crypto should be tax-favoured. There is zero societal benefit in investment in crypto as compared with, say, investment in businesses that generate activity, employment and wealth, or investment in productive assets. If anything, crypto is socially detrimental, because of the environmental impact.
Invest in crypto if you want. But before you start looking for other taxpayers to support you in that, stop and think how stupid that looks.
You don't have to provide full workings unless requested. You should have your full workings in order to have paid your CGT. Your return is just to match the CGT paid already.
I'm a newbie filling out CGT forms myself for the first time. I have a question.
I get that you pay 33% tax on gains in Ireland.
Do I need to provide any proof of purchase, (statement from exchange/bank statements) + my realised gains workings in a clear format as supplementary evidence?? I'm struggling to find info on the whole process in lay terms
Is there a chance they will come looking for full workings? Thanks.
That makes sense
>I don’t think the fact that an asset class offers very high returns is a justification to have lower CGT on it
But this is what makes it non-viable to dispose of crypto in Ireland, in my eyes. E.g. paying CGT on a house that goes from €10k to €1M over 50 years isn't as punitive as paying CGT on a crypto portfolio that goes from €10k to €1M in 6 months.
Re: attracting foreign wealth (or keeping Irish wealth in Ireland)...I watched a recent talk by the ESRI on how to increase tax revenue. In an hour of ideas and then a panel discussion, nobody mentioned any tax reductions in order to increase the take. Crypto is a ~$2T market, largely owned by regular joes, and these people are willing to move wherever to draw it down. Our CGT rules are out of step with this very recent development imo.
While I agree that reducing the rate would possibly be a good deal for the taxman if it is being sufficiently reduced to attract foreign wealthy investors and retain more Irish ones, I don’t think the fact that an asset class offers very high returns is a justification to have lower CGT on it.
The goal of CGT is to tax people proportionally to the wealth being created by their capital. If mister normal has become a multi-millionaire thanks to crypto he needs to accept that he is now a big fish and the amount of tax he owes on this massive wealth creation is much higher than what he had been used to. And of course he is welcome to explore tax optimisation strategies and to become a tax resident in another jurisdiction if he thinks the Irish CGT rate and calculation rules are too disadvantageous (I wouldn’t blame him).
This is pretty much what Ireland does for corporations. We have a low corporate tax rate in the first place and are giving multinational companies even better deals that the baseline rate paid by small local companies
It isn’t a simple black and white issue though. You can say it is morally wrong to give large wealthy corporation such a low rate, but the net effect is that is does increase tax receipts for the government and pays for social spending (as otherwise those companies wouldn’t be here and would therefor pay no tax). A low CGT rate to attract foreign investor would have a similar effect (there might be other factors driving the CGT rate and there is an open discussion to be had on what makes the most sense for the country of course, but thinking that decreasing the rate would necessarily reduce the amount of tax paid would be a big mistake when it comes to this type of tax).
What other assets have x0000% increases in value in a short space of time, making the gain essentially the same as the value of the asset? I suppose some derivatives could but what else? I imagine CGT wasn't designed with such asset classes in mind? Maybe I'm wrong
Its not out of line with anything!!!!!!
? My proposal is that CGT is lowered for cryptocurrency, given that gains are out of line with (I suppose) the types of gain in asset prices that CGT was conceived for. I didn't say to only tax the poor...?
The reason for this proposal is to retain wealth in the country, and furthermore, attract it.
Yes we should only tax the poor and let the wealthy into the country and tell them we will tax them differently just because they made money on crypto. Excellent idea 🙄
Is there any EU rule or similar that prevents Ireland from having, e.g., 5% CGT on cryptocurrency? I see many crypto mega millionaires online who give up citizenship and seek residency elsewhere for tax purposes. It seems silly to essentially force the wealthiest crypto holders out of a country, in order to get a 33% cut from people with meagre crypto earnings who aren't motivated to leave. Furthermore it seems like a good idea to attract crypto wealth. Does anyone sense that CGT rules around crypto will be revised?
Many people's crypto assets have started at a price near €0 and gone up x00000%. CGT doesn't seem like an appropriate tax for, let's say, a portfolio that is bought for €100 and sold for €10m, given that the "gain" is 99.999% of the total value of the portfolio. Is there any other asset class that has such rates of return, for which CGT is so punitive, or is crypto "special" in this sense?
Yeah I'm pretty sure b+b rules don't apply when you're making a gain in Ireland (only when you're making a loss) - perhaps someone else can confirm that's the case?
Thanks for the reply.
I'll be locking in a gain (cash out) on eth so going by your statement, I can sell now and theoretically buy back tomorrow regardless of whether the price goes up or down?
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