Recent Revenue Guidance on Crypto-assets - April 2022
If you are a Non-Dom and tax resident in Ireland, Revenue has recently updated their guidance on whether or not the remittance basis applies to crypto-assets.
Where a crypto-asset exists 'on the cloud' , it will not actually be situated anywhere and therefore, cannot be viewed as 'situated outside the State'.
So, it would seem that profits made on the sale of crypto-assets (coins, tokens, NFTs etc...) are taxable in Ireland even if the funds are not brought back into the country.
Do I have to pay tax on cryptocurrency in Ireland?
The simple answer is yes. If you are tax resident in Ireland, then you need to pay Capital Gains Tax (CGT) of 33% on any profit you make on the disposal of a cryptocurrency.
What is Disposal?
Disposal is a tax term and is generally one of two things:
- You sell the cryptocurrency for cash.
- The nature of the asset changes. If you sell one cryptocurrency and then buy another with the proceeds.
If any of these transactions generate a profit – then this profit is considered a capital gain and is subject to a CGT of 33%.
Is any of this tax-free?
The first €1,270 of your gains is tax-free. This is a yearly allowance.
When do you pay your CGT?
Revenue has added a complication here and there are two payment dates:
For disposals made between the 01 Jan and the 30th of November you need to pay the CGT by the 15th of December.
For disposals made between the 01 Dec and the 30th of Dec, you need to pay the CGT by the 31st of Jan of the next year.
So basically, you need to pay your CGT in the same year that you dispose of the cryptocurrency.
Late payment will incur an interest charge. A late return will incur a penalty.
What if you have losses on your cryptocurrency assets?
CGT is only paid at the disposal of the cryptocurrency. If within the calendar year, you have losses on some disposals but gains on others – then normally the net amount is subject to CGT.
What if you re-invest your profit into more Cryptocurrency?
Even if all your cash is tied up in Cryptocurrency at the end of the year, you still need to pay CGT on the net gains from your trading/disposals.
How do you pay CGT?
You must register for CGT and then pay using ROS or myAccount. This applies to individuals and companies that may need to pay CGT.
Are tax authorities focusing on this?
Yes, and not just in Ireland. In the UK it was widely reported that HRMC asked for Coinbase to provide records of UK customers who received more than £5,000 last year.
There is a clear electronic trail of all transactions, so it would not be difficult for Revenue to analyse these and check if CGT was paid.
The message from Revenue is clear here. If you make profits on cryptocurrency, then you need to pay your taxes.
How will Revenue know about your various crypto accounts?
If you have an account with any of the European digital currency exchanges, then in all likelihood Revenue already has your data.
There is a raft of new EU directives on data sharing and money laundering which are likely to give Revenue the authority to look into crypto companies' accounts and their customer's various assets and transactions.
How is Staking taxed in Ireland?
Interest from Staking is normally treated as income and taxed at the marginal rate.
If you are already a PAYE employee, then any interest from staking is considered extra income on top of your PAYE salary.
This can be taxed at 52% (depending on how much you earn).
This is also the case for any income from lending, DeFi and masternodes.
How is Crypto Mining taxed in Ireland?
Any profit from Crypto mining are viewed as income and thus subject to income tax/corporation tax rather than CGT.
In the case where the mining activity does not amount to a specific trade, the value of any crypto-assets or fees received for successful mining, less allowable expenses, may be taxable as income.