Irish Tax Guide to Cryptocurrency Trading & Investing

With the surge in the amount of people now dabbling in the cryptocurrency* market, herewith a guide to the Irish tax implications.

These relate to gains and profits on trading and/or investing in the currency type.

*Some of the cryptocurrencies, include BITCOIN, LITECOIN, RIPPLE, ETHEREUM among many others.

You can contact Liam Burns here for a consultation or to get your CGT or income liability filed and paid.

Trading vs Investment: What is the difference in how these activities are defined and taxed?

The tax legislation does not set out specific rules to determine what is trading versus what is investment. However, well-established guidelines are used, and are known as the ‘badges of trade’;

The Subject Matter – Most property can be traded, including cryptocurrency

Length of Ownership – Generally investments are held for long term, while short term ownership of assets are more likely considered dealing.

Frequency of similar transaction – If gains made regularly over a period of time from similar assets, an assumption could be made that an individual is dealing rather than investing.

Supplementary work – if addition works are carried out on the asset, or enhanced to become more marketable, then this is evidence of trading – if nothing is done then it tends to be viewed as an investment.

Circumstances for realisation – If an event occurs that calls for the realisation of the asset, say for another opportunity, this will be evidence leaning towards an investment

Motive – The motive of the individual is always considered i.e. the seller’s intentions

It may not always be obvious and therefore it is important to take the full picture into account when ascertaining whether you are trading or not. All factors need to be considered, and any one factor may be of greater or lesser importance.

Investment Tax Implications – Capital Gains Tax

At present, an investment in cryptocurrency is looked upon by Revenue in the same manner that an investment in any other currency, stock or share would be.

On that basis, if a gain/profit is made through the disposal (whether by way of GIFT, SALE or EXCHANGE), then the gain/profit made is taxable under Capital Gains Tax (Current Rate = 33%)

An individual that disposes of cryptocurrency, is therefore required to file a CGT return (CG1) and pay any related liability that may arise.

CGT Payment Dates:

For Gains made in the period 01/12/2017 – 31/12/2017, Tax is payable 31/01/2017

For Gains made in the period 01/01/2018 – 30/11/2018, Tax is payable 15/12/2018

CGT Filing Date:

For Gains made in the period 01/01/17 – 31/12/17, Tax return is due for submission 31/10/2018

NOTE: Late Filing surcharge of up to 10% of the liability is automatically applied for returns filed late. Interest may also be payable from the date the liability was due to be paid

CGT Losses Offsets

Given that gains are taxable, then then capital losses can be utilised in the same way as any other capital losses i.e. capital losses can be offset against capital gains in the same or future period.

For example, if you invested €10,000 in Bitcoin and the value upon disposal was only €5,000, this could be offset against a gain on disposal of say property, shares etc. within the same period. If no gain is made in the at period, then the loss can be carried forward and offset in future periods.

(UPDATED – 31/01/2018) What constitutes a disposal of an asset?

Having published this post, I received the following query from a reader;

Hey Liam,

Great article you wrote on the tax implications for cryptocurrency investors.

The one touchpoint that doesn’t seem to be crystal clear though is what actually constitutes the disposal of an asset?

(You say ‘whether by way of GIFT, SALE or EXCHANGE’.)

A) Does the realisation of that profit depend on the profit hitting your bank account, or

B) Does an exchange on a trading platform count even though theoretically that profit could disappear with the next market dip?

Best regards,

David

The answers are thus;

A) The gain on the disposal of the asset is realised, whether or not the funds are transferred back into your bank account.

B) Yes. If you have assets on any particular platform, once your position is closed on that transaction (i.e. the profit/gain is allocated to your account on that platform) then the gain/profit becomes taxable.

If subsequently, that profit/gain ‘disappears’ through changes in exchange rates or losses on reinvesting the funds, then these losses can be written off against the original profits, subject to the conditions on using losses as summarised elsewhere on this page for both CGT and Income Tax.

Trading Tax Implications – Income Tax

On the basis that cryptocurrency is looked upon as taxable under CGT for investments, then it can be assumed that ‘traders’ will be taxable in the same manner as traders of stocks, other currencies or shares. That is, the profits from trading will be taxable under Income Tax rules.

Therefore, individuals that are trading in cryptocurrency are required to file an income tax return (Form 11 or Form 12) each year and declare profits made on trading. The profits will be subject to normal income tax rules i.e. PRSI, PAYE and USC Will apply at the relevant rates (Up to 52% tax).

Income Tax File and Pay Date:

For Accounts ending 01/01/2017 – 31/12/2017, tax return and payment is due for submission to Revenue Commissioners on or before 31/10/2018 (extended if by up to 2 weeks if filed online)

NOTE: Late Filing surcharge of up to 10% of the liability is automatically applied for returns filed late. Interest may also be payable from the date the liability was due to be paid.

Income Tax Loss Offsets

Given that profits are taxable, then then trading losses can be utilised in the same way as any other trading losses.

Trade losses can be offset against other trading profits in the same period. If no other trading profits in that period available for offset, then losses can be offset against other income within the period or carried forward against trading profits in future periods.

ACCOUNTING & FILING FEES

FOR MORE INFORMATION – CONTACT LIAM ON (01)5677380 OR USE THE ENQUIRY FORM