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Capital Gains And Crypto

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Comments

  • Registered Users Posts: 5,490 ✭✭✭stefanovich


    I don't think I've found a way to avoid paying tax, I just think the system is completely outdated and inefficient.

    It’s why loans against your crypto are so popular.


  • Registered Users Posts: 2,098 ✭✭✭Tails142


    This got me thinking if I exchange euro to sterling and then months later transferred back to euro making a gain, would it be liable for CGT too, anyway, I googled and the answer is yes. So I can see why crypto would be the same as a result

    Under Section 532 any currency other than the euro is an asset for the purposes of capital gains tax. Accordingly, a chargeable gain/allowable loss can arise to a person buying and selling foreign currency otherwise than in the course of trade.
    www.revenue.ie › tdm › part-...PDF
    Part 19-01-14a - Foreign currency gains/losses arising otherwise


  • Registered Users Posts: 1,221 ✭✭✭wally1990


    I don't think I've found a way to avoid paying tax, I just think the system is completely outdated and inefficient.

    I didn't mean you personally

    In fact, none of your posts lead me to believe that

    You were just asking many questions for different scenarios to gain an understanding in each of your cases

    You weren't arguing the answers

    However other people do, and disagree with accountants /professionals on such

    Whilst people (including accountants) ""may" not like or personally disagree with the CGT rules OR the rates of CGT in Ireland etc , unfortunately they are the rules


    I think the vast majority think 33% is way too high OR the exemption of 1270 is way too low

    Personally I'd like the 33% to be closer to 20% but the 1270 is personally laughable , not even worth talking in reality

    The "incentive" will always be there to invest and try to make passive income and pay CGT as opposed to carrying on a trade and paying up to 52% but because the exemption might aswell be 0,&
    the 33% is much to close to the 52%

    That's my own opinion,
    but I do agree with Ciaran that CGT applies in each of the circumstances, (well... I've no choice they are the rules )

    but it just so happens crypto is so much more regularly traded , bought and sold and multiple trades of Fiat to BTC to XRP to BTC to FIAt can be done in seconds and to consider each as a disposal for CGT is what annoys people ,

    but then if your doing it "that " often/regularly is it a trade ?

    Crypto is a different beast compared to the "traditional" investment for people

    Fair enough traders , well.. are traders and they do that all day every day

    The "Joe blogs " of the world is used to buying X stock, leaving it appreciate/depreciate over a longer term period and eventually selling it holding to secure a gain

    Crypto and technology have made it much easier, faster and seamless now to buy, sell and trade within seconds multiple assets and it's charging how traditional investment is being done

    That's how I see It anyway,
    It's still purchasing an asset
    And selling for a gain/loss

    But current tech have made it possible either do 1 day today or a 100 and do nothing again for months
    And each of those trades on that 1 day need to be accounted for (probably in a FIFO method I'd assume )


  • Registered Users Posts: 4,683 ✭✭✭barneystinson


    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.

    I'll bet you a whole bitcoin that in 20 years there'll still be a State currency. May well not be the Euro, but there'll still be one. It's kinda fundamental.


  • Registered Users Posts: 435 ✭✭Brontosaurus


    wally1990 wrote: »
    I didn't mean you personally

    In fact, none of your posts lead me to believe that

    You were just asking many questions for different scenarios to gain an understanding in each of your cases

    You weren't arguing the answers

    However other people do, and disagree with accountants /professionals on such

    Whilst people (including accountants) ""may" not like or personally disagree with the CGT rules OR the rates of CGT in Ireland etc , unfortunately they are the rules

    I think the vast majority think 33% is way too high OR the exemption of 1270 is way too low

    Personally I'd like the 33% to be closer to 20% but the 1270 is personally laughable , not even worth talking in reality

    The "incentive" will always be there to invest and try to make passive income and pay CGT as opposed to carrying on a trade and paying up to 52% but because the exemption might aswell be 0,&
    the 33% is much to close to the 52%

    That's my own opinion,
    but I do agree with Ciaran that CGT applies in each of the circumstances, (well... I've no choice they are the rules )

    but it just so happens crypto is so much more regularly traded , bought and sold and multiple trades of Fiat to BTC to XRP to BTC to FIAt can be done in seconds and to consider each as a disposal for CGT is what annoys people ,

    but then if your doing it "that " often/regularly is it a trade ?

    Crypto is a different beast compared to the "traditional" investment for people

    Fair enough traders , well.. are traders and they do that all day every day

    The "Joe blogs " of the world is used to buying X stock, leaving it appreciate/depreciate over a longer term period and eventually selling it holding to secure a gain

    Crypto and technology have made it much easier, faster and seamless now to buy, sell and trade within seconds multiple assets and it's charging how traditional investment is being done

    That's how I see It anyway,
    It's still purchasing an asset
    And selling for a gain/loss

    But current tech have made it possible either do 1 day today or a 100 and do nothing again for months
    And each of those trades on that 1 day need to be accounted for (probably in a FIFO method I'd assume )

    Fair enough and good points. My question/issue with the transfer of fiat to intermediary coin to altcoin is that many altcoins can ONLY be bought with BTC, USDC/T, or Ethereum. This isn't to "hide" transactions or avoid taxes, it's due to technical and functional aspects of these tokens and the networks they exist within. So making these taxable events really hinders acquiring any of these assets.

    If I were to obtain some this year and sell them years later, I'd have to still submit records them despite me owing 0 tax since there's no profit being made until they're sold. It would also be a massive headache to work out and record all of it too.

    Then there's the nightmare of keeping records of staking and similar, where you stake your crypto to help maintain the network and earn either the same crypto or derivative as interest/payment. I've no idea how to work out what tax to pay for that and how, so I'm not even going to bother with it. It's a shame though, there are some massive returns being made.
    I'll bet you a whole bitcoin that in 20 years there'll still be a State currency. May well not be the Euro, but there'll still be one. It's kinda fundamental.

    Obviously, no one here is arguing that. We'll be using some sort of CBDC and cash will be long-gone. My point is regarding the regulations and taxation.


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  • Registered Users Posts: 5,490 ✭✭✭stefanovich


    I'll bet you a whole bitcoin that in 20 years there'll still be a State currency. May well not be the Euro, but there'll still be one. It's kinda fundamental.

    I wouldn’t call the euro a state currency.


  • Registered Users Posts: 4,683 ✭✭✭barneystinson


    I wouldn’t call the euro a state currency.

    It is the official currency of the State, apologies if I was loose in my wording.

    In 20 years, the Irish State will still have an official currency (in my opinion). That is the currency that transactions will be officially valued in / recognised by the State.


  • Registered Users Posts: 10,150 ✭✭✭✭Marcusm


    Tails142 wrote: »
    This got me thinking if I exchange euro to sterling and then months later transferred back to euro making a gain, would it be liable for CGT too, anyway, I googled and the answer is yes. So I can see why crypto would be the same as a result

    Under Section 532 any currency other than the euro is an asset for the purposes of capital gains tax. Accordingly, a chargeable gain/allowable loss can arise to a person buying and selling foreign currency otherwise than in the course of trade.
    www.revenue.ie › tdm › part-...PDF
    Part 19-01-14a - Foreign currency gains/losses arising otherwise

    If you are holding physical currency then this will be the case. If it is a money debt then you will likely find that any gain/loss falls out of account as you are the “original holder” - see s541.


  • Registered Users Posts: 5,490 ✭✭✭stefanovich


    It is the official currency of the State, apologies if I was loose in my wording.

    In 20 years, the Irish State will still have an official currency (in my opinion). That is the currency that transactions will be officially valued in / recognised by the State.

    Yes but the central bank has no control. We lost our monetary sovereignty with the euro.


  • Registered Users Posts: 8,370 ✭✭✭lawrencesummers


    Yes but the central bank has no control. We lost our monetary sovereignty with the euro.

    The central back controls the Euro alright. Just not the Irish central bank.


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  • Registered Users Posts: 5,490 ✭✭✭stefanovich


    The central back controls the Euro alright. Just not the Irish central bank.

    So you agree with me.


  • Registered Users Posts: 4,683 ✭✭✭barneystinson


    Yes but the central bank has no control. We lost our monetary sovereignty with the euro.

    I don't see what that has to do with my post.


  • Registered Users Posts: 510 ✭✭✭Frozen Veg


    Where do PAYE workers declare crypto profits in the PAYE annual return online?

    Is it under 'other income' 'trading profits'?


  • Moderators, Sports Moderators Posts: 14,599 Mod ✭✭✭✭CIARAN_BOYLE


    Frozen Veg wrote: »
    Where do PAYE workers declare crypto profits in the PAYE annual return online?

    Is it under 'other income' 'trading profits'?

    Trading profits would be a trade. Crypto profits is taxable under capital gains.

    Sorry I'm not sure where you fill it in on paye anytime. I just know its not a trade.


  • Registered Users Posts: 5,490 ✭✭✭stefanovich


    Trading profits would be a trade. Crypto profits is taxable under capital gains.

    Sorry I'm not sure where you fill it in on paye anytime. I just know its not a trade.

    Isn't there a section for capital gains? If you are going to report gains then make sure you also report losses or carry over losses from the previous year.

    Is it even worth mentioning if it is below the 1000 punt level?


  • Registered Users Posts: 414 ✭✭Emma2019


    Trading profits would be a trade. Crypto profits is taxable under capital gains.

    Sorry I'm not sure where you fill it in on paye anytime. I just know its not a trade.

    On what basis is it not a trade? I have friends involved in crypto and some are paying CGT on it and some are paying income tax because nobody is really sure.

    If you are engaging in daily or almost daily microtransactions, does the level of time and management put into that not indicate a trade rather than the buying and selling of a capital asset?


  • Registered Users Posts: 2,386 ✭✭✭olestoepoke


    I haven't made any crazy profits as of yet but just curious does Binance share your info with the Irish Revenue? Hypothetically speaking if I cashed out €2,000 do they send the receipt to the government or is it recognised in your bank and then reported, as Ive said I wished I had made enough to worry about this but I'm just curious as to how it works.


  • Closed Accounts Posts: 161 ✭✭JibJabWibWab


    I haven't made any crazy profits as of yet but just curious does Binance share your info with the Irish Revenue? Hypothetically speaking if I cashed out €2,000 do they send the receipt to the government or is it recognised in your bank and then reported, as Ive said I wished I had made enough to worry about this but I'm just curious as to how it works.

    Binance are based in Malta so Irish Revenue have access to the information on Irish residents, if they want it.

    It's not a case of sharing info. If you come to the attention of Revenue for any reason, and they discover a connection to Binance, they will request your records from Binance at that point.


  • Registered Users Posts: 335 ✭✭boring accountant


    Emma2019 wrote: »
    On what basis is it not a trade? I have friends involved in crypto and some are paying CGT on it and some are paying income tax because nobody is really sure.

    If you are engaging in daily or almost daily microtransactions, does the level of time and management put into that not indicate a trade rather than the buying and selling of a capital asset?


    Most people who "trade" crypto are not really involved in a trade. There is a presumption in favour of profits derived from speculative assets to be chargeable to CGT. Each case will be unique but the burden of proof is on the taxpayer to substantiate their claim.



    There is currently no precedent that I'm aware of where Revenue judged cryptocurrency profits to be derived from a trade so you'll struggle to find an accountant willing to advise a client to claim trading.


    There have been rare cases where individuals trading shares have been given trading status (in the UK). In the ones I'm aware of, the person involved operated the trade through a company and had employees with the requisite professional expertise.


    If you think you're carrying on a trade, you'll need substantial evidence to support it. Here's a non-exhaustive list:


    Company memorandum of association stipulating how the business is to be carried out
    Written business plan
    Evidence of accountability and discipline, i.e. unconnected shareholders. If you are only accountable to yourself then it might be considered too casual.
    A paper trail setting out the motive and rationale for entering each trade.



    I hope your friends who have claimed their crypto gains as trading have good accountants and likely good lawyers. My gut tells me that the only way Revenue will accept the trading argument is if you beat them in court.


  • Registered Users Posts: 56 ✭✭Anj1813


    Its from 2019, a general info just to show a reality. Its as well about Koinly, a soft helping to calculate crypto taxes. I tried it and looks solid for me as Im not a specialist in accounting.
    https://irishtechnews.ie/crypto-taxes-in-ireland-how-to-prepare/


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  • Registered Users Posts: 335 ✭✭boring accountant


    Most people who "trade" crypto are not really involved in a trade. There is a presumption in favour of profits derived from speculative assets to be chargeable to CGT. Each case will be unique but the burden of proof is on the taxpayer to substantiate their claim.



    There is currently no precedent that I'm aware of where Revenue judged cryptocurrency profits to be derived from a trade so you'll struggle to find an accountant willing to advise a client to claim trading.


    There have been rare cases where individuals trading shares have been given trading status (in the UK). In the ones I'm aware of, the person involved operated the trade through a company and had employees with the requisite professional expertise.


    If you think you're carrying on a trade, you'll need substantial evidence to support it. Here's a non-exhaustive list:


    Company memorandum of association stipulating how the business is to be carried out
    Written business plan
    Evidence of accountability and discipline, i.e. unconnected shareholders. If you are only accountable to yourself then it might be considered too casual.
    A paper trail setting out the motive and rationale for entering each trade.



    I hope your friends who have claimed their crypto gains as trading have good accountants and likely good lawyers. My gut tells me that the only way Revenue will accept the trading argument is if you beat them in court.

    To add to this. Anyone who has claimed cryptocurrency profits as trading income would be best advised to contact their accountant for help in preparing an unprompted qualifying disclosure. This is when you voluntarily report an error on past returns. It can help to limit the penalties and surcharges that apply on the unpaid tax liability. If there are outstanding liabilities, the earlier you do this the better.


  • Registered Users Posts: 414 ✭✭Emma2019


    Well they disclosed it as Case I income. Nothing relating to the memorandums etc that you mentioned would apply as they are individuals and not a company.

    Also, given the tax rate is higher on Case I than CGT, if anything they would have an overpayment, particularly if you include the €1,270 exemption.

    If you look at the badges of trade there's a strong argument they would be considered trading:

    1 The Subject Matter of the Sale - Assets which can be sold for trading purposes
    2 The Length of Period of Ownership. - Short term with an intent to turnover rather than hold
    3 The Frequency of Similar Transaction. - High frequency of similar transactions
    4 Supplementary Work. - Research, tracking various cryptos etc
    5 The Circumstances that Were Responsible for the Realisation. - in response to price fluctuations
    6 Motive - Profit

    I get your point that if they had set up a company and were trying to claim a 12.5% rate instead of the passive 25% rate that there might be an issue but I can see how Revenue can argue CGT doesn't apply in the hands of the individual.


  • Registered Users Posts: 335 ✭✭boring accountant


    Emma2019 wrote: »
    Well they disclosed it as Case I income. Nothing relating to the memorandums etc that you mentioned would apply as they are individuals and not a company.

    Also, given the tax rate is higher on Case I than CGT, if anything they would have an overpayment, particularly if you include the €1,270 exemption.

    If you look at the badges of trade there's a strong argument they would be considered trading:

    1 The Subject Matter of the Sale - Assets which can be sold for trading purposes
    2 The Length of Period of Ownership. - Short term with an intent to turnover rather than hold
    3 The Frequency of Similar Transaction. - High frequency of similar transactions
    4 Supplementary Work. - Research, tracking various cryptos etc
    5 The Circumstances that Were Responsible for the Realisation. - in response to price fluctuations
    6 Motive - Profit

    I get your point that if they had set up a company and were trying to claim a 12.5% rate instead of the passive 25% rate that there might be an issue but I can see how Revenue can argue CGT doesn't apply in the hands of the individual.

    It would be easier to claim trading as a company not harder. The tax rate has less effect as it is not a question of the rate it’s a question of law and fact. Being in a company provides a legal structure, you can record board minutes where you discuss trading and risk management strategies, financing, etc. You can accept outside investment which would prove accountability.

    The badges of trade are just the beginning. You have a much higher bar to meet with chargeable assets as opposed to wasting assets as the presumption is in favour of CGT for the former.

    But even taking one as an example:
    Supplementary work, if asked, could you provide internal documentation to prove that you’re trading according to a strategy or particular set of rules? What are the internal consequences of you/an employee failing to follow the rules?

    A former professional commodities broker in the UK had his claim for trading treatment disallowed because he was deemed to be too “casual” in his approach.

    I see your point of view. I’ve done some research myself looking for ways to claim trading, but I see very little chance that a sole trader could claim it as the amount of documentation, activity and record keeping that would be required would be nigh impossible for one person to do while still committing themselves full time to trading.

    Think of all of the functions of a hedge fund or investment firm. You would need to be performing most or all of them to reach that bar.

    I could be dead wrong and someone might succeed in their claim. If that’s the case I’ll make a business out of helping clients to set themselves up as crypto traders. I think if I tried it now though I’d be sued into oblivion.

    I would caution against it unless you have deep pockets.


  • Registered Users Posts: 56 ✭✭Anj1813


    Hello. What if Im mining crypto? When it will be taxable? In moment when received to wallet (every day or week), or on the end of taxable period in Nov? Or isnt taxable some how? Thanks.


  • Registered Users Posts: 335 ✭✭boring accountant


    Anj1813 wrote: »
    Hello. What if Im mining crypto? When it will be taxable? In moment when received to wallet (every day or week), or on the end of taxable period in Nov? Or isnt taxable some how? Thanks.

    Just shooting from the hip here, but I think it would be taxed as trading income in the period in which it was received. You will need to value it as at the date of receipt and deduct any costs of inputs, such as electricity, internet connection and capital allowances on equipment and that would be your taxable income for the year.

    The liability would be due whenever your next income tax deadline is, i.e. 31 October 2021 for the 2020 tax year.


  • Registered Users Posts: 56 ✭✭Anj1813


    Just shooting from the hip here, but I think it would be taxed as trading income in the period in which it was received. You will need to value it as at the date of receipt and deduct any costs of inputs, such as electricity, internet connection and capital allowances on equipment and that would be your taxable income for the year.

    The liability would be due whenever your next income tax deadline is, i.e. 31 October 2021 for the 2020 tax year.

    Lets think this way:
    Mining is a cryptology service. Im connecting my computer to network, doing computing and Im rewarded if cryptology job is done by my computer.


  • Registered Users Posts: 18 Mistermu


    Do you think even using trading bots would fall under CGT instead of Income tax? Bots automatically perform hundreds of trades a day, but I guess the work involved is not much (just the set-up and some monitoring)


  • Registered Users Posts: 1 dariashadow


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