Whether you own Bitcoin, Ethereum, or Stablecoins, you need to understand the Irish tax laws before gaining access to the Irish crypto market. Ireland has some of the highest rates of income tax in Europe and there is a possibility that you will end up paying CGT. Fortunately, there are a variety of deductions you can take to keep the cost of acquiring and holding crypto under control. Here are a few of them:
Capital Gains Tax (CGT)
If you are a non-resident of Ireland and you have disposed of assets in the country, you will have to file a Capital Gains Tax (CGT) return and pay the relevant tax. In addition, you will need to complete a TR1(FT) form. The amount of CGT to be paid depends on the amount of gain made on the disposal. You may deduct unused capital losses from the gain.
The Revenue Commissioners use the term disposal to describe various methods of transfer of ownership. Any transfer of ownership of an asset is considered a disposal. A disposal can include a gift, exchanging assets, receiving insurance, or even receiving compensation for the asset. Whether an asset is sold or transferred, the taxpayer will be liable for CGT based on the gain. If you sold the asset, only the difference in price is included in the taxable amount.
A disposal within seven years of purchase will qualify for the relief. If you sell the property within 7 years of its acquisition, the relief will only apply to the first seven years of holding the property. The rest of the gain will be taxable. After seven years, the standard rate of CGT is 33%, while the 30% rate was previously applied for disposals after the 7 December 2012 tax reforms. However, if you sell a property that was acquired less than seven years ago, you may be able to avoid the CGT entirely.
Transfers between spouses or civil partners are exempt from Capital Gains Tax. If the sale was carried out under a court order or Separation Agreement, the gain is exempt. Additionally, the sale proceeds of a primary residence or an apartment must reflect development value. Finally, the transfer of land to a child is exempt from CGT if it is used as the child’s primary private residence. The land must be valued at EUR500,000 or less.
Income tax
If you sell cryptocurrencies for profit in Ireland, the revenue will likely treat it as a capital gain. Irish capital gains tax rates are 33%, and losses are generally treated as ordinary income. The following is a summary of the income tax rules that apply to companies. It may be helpful to contact a tax professional before selling crypto for profit. However, the tax rules for crypto taxes in Ireland are more complicated than they are for ordinary income.
Investing in crypto in Ireland is a form of investment. It is a form of capital gains and will be taxed in the same way as any other investment. It is important to remember that you can deduct certain expenses if you sell cryptocurrencies for profit. However, you should register with the Revenue if you earn more than EUR5k per year. In addition, if you stake your crypto for a staking yield, it would be taxable at up to 55%, but you would have to report the staking yield to the Revenue annually.
The Revenue has issued guidance on the taxation of transactions involving cryptocurrencies in April 2020. This guidance has been updated in recent weeks. Among other things, it refers to cryptocurrencies as assets and uses the term “crypto-asset”. This means that you may have to report crypto-assets when selling art or other assets. The definition of an asset is anything of value that can be converted into cash.
When selling crypto, you need to report any capital gains. This includes the amount of crypto you sold, the date of sale and the cost of acquiring the asset. The key to successfully claiming this tax is to keep the correct log of transactions. Crypto tax software will help you keep the necessary logs. If you’re unfamiliar with this process, try using a cryptocurrency tax calculator. These tax calculators will sync with your exchange or wallet and generate your tax return automatically.
Stamp duty
Irish law considers crypto-assets to be investments, and the profit earned from the sale of crypto assets is taxable. Income tax rates for individuals are marginal and range up to 55%, inclusive of social insurance and universal social charge. However, individuals are unlikely to establish a sophisticated commercial activity or infrastructure that would make them eligible to claim reliefs from these taxes. Therefore, stamp duty should not apply to the sale of crypto, and no VAT should generally apply.
Bitcoin is a stateless digital currency and, as such, is outside traditional commerce and finance. It has been associated with significant VAT issues, due to the complexity of the technology and the transactions involved in the process. Furthermore, Bitcoin is decentralised and anonymous, which further complicates taxation. However, Irish tax law does not specifically address the taxation of crypto-related transactions. So, despite this, it is prudent to read the relevant tax legislation before investing in this new market.
In addition to capital gains tax, investors must declare their gains from crypto-assets to the Revenue. However, the first EUR1,270 of gains is exempt from CGT. The price of Bitcoin (BTC) is EUR5,000 (exchange fees included). Therefore, capital gains tax for those who buy and sell Bitcoin is 33% of the purchase price. This rate is lower for the first EUR1,270 of gains in a year.
Income tax bands for cryptocurrency investment in Ireland are similar to those for conventional investments. Assuming you earn EUR5k per year, you’d need to file a tax return. However, you can deduct expenses from your income. In addition, you may be able to borrow crypto for a staking yield. This would work like peer-to-peer lending in the non-crypto world, and your profits would be taxable. In this case, you would have to report your earnings every year to the Revenue.
Stablecoins
Despite the recent rise of cryptocurrency, the Irish government has remained largely silent on the issue of crypto taxes. This is not surprising given that the country’s Central Bank has repeatedly stressed that cryptocurrencies are not securities. As a result, they will be treated as personal property when a person dies. This means that any cryptocurrency accounts would be included in the deceased’s estate, which is administered by an administrator or executor in the event of intestacy. However, there may be exceptions to the general rule and a specific exception for stablecoins, which are directly exchangeable with fiat currencies.
In Ireland, stablecoins are not currently regulated, but they could become so if they are. There are two types of stablecoins: fiat-backed and asset-backed. Fiat-backed stablecoins have a direct link to fiat currency, such as USDT. Asset-backed stablecoins require a physical asset to act as collateral. This means that the tax implications are lessened, but the tax burden still applies.
Aside from the capital gains tax, cryptocurrency users could be subject to a third type of tax: VAT. This tax is 33% of the profit generated by the cryptocurrency transaction. This tax may be payable if you decide to sell your crypto for cash. However, in Ireland, you do not have to sell your cryptocurrency, as it is exempt from VAT. You just need to remember to report any profits generated from crypto transactions.
Although the Irish Government is announcing its support of crypto and decentralised finance, the government has not yet taken a definitive stance on whether or not these currencies are regulated. The Irish Central Bank has acted as the lead regulator in the area and has issued a number of warnings on the risks of virtual currencies and initial coin offerings. In the meantime, it is crucial to understand the legal status of stablecoins in Ireland.
Value Added Tax
Although there are no specific Irish VAT rules for crypto currency, Revenue acknowledges that they may be subject to a high VAT rate. While there is no unified “exchange rate” for all cryptos, Revenue recommends a reasonable effort to calculate tax on cryptos based on their value. The Revenue is also aware of the potential tax benefits of cryptocurrencies. Its advisory notes that Ireland is one of the few EU countries to have adopted legislation relating to the taxation of cryptos.
Although individuals can engage in the trade or deal in crypto in Ireland, the profits made from these activities will be subject to Irish income tax. Income tax rates range up to 55% in Ireland, and they include social insurance and the universal social charge. However, in practice, individuals rarely set up a sophisticated infrastructure for their commercial activity. Furthermore, they are unlikely to trade in conventional financial assets or cryptocurrency. Thus, there should be no VAT or stamp duty on the sale of crypto in Ireland.
Cryptocurrency investors in Ireland should be aware of the capital gains tax regulations. While there is a 1270EUR exemption for capital gains tax, any profits over this amount will be subject to 33%. As with any other investment, cryptocurrency investors must file annual tax returns and claim their profits. However, investors can offset any losses in crypto with their gains from other investments, which reduces their tax burden. While many cryptocurrency users have been left unsure of how to deal with capital gains tax, there is no need to worry. Revenue has issued guidance on the taxation of cryptocurrency.
If you decide to invest in crypto currency in Ireland, it is important to be aware of the capital gains tax and the value added tax on it. As with any other type of asset, Ireland will tax profits generated from crypto transactions. Interest on lending and staking will also be subject to the Capital Acquisitions Tax (CAPT), which currently applies to 33% of the value of the crypto asset at the valuation date.
Hopefully, this was helpful. Should you need a help of an experienced crypto tax accountant in Ireland, please don’t hesitate to get in touch.