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  • Tag Archive: crypto tax

    1. Texas Man Faces Historic Charges Over Crypto Capital Gains Tax

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      US Historic Crypto Tax charges – Introduction

      In a groundbreaking case that signals the Internal Revenue Service’s (IRS) increasing scrutiny of digital assets, a Texas man has been indicted for filing false tax returns related to unreported cryptocurrency transactions.

      This marks a significant moment in the enforcement of tax laws on digital currency gains, underscoring the federal government’s commitment to upholding tax compliance in the cryptocurrency space.

      Background

      The Department of Justice (DoJ) announced that an Austin resident was charged with filing false tax returns from 2017 to 2019, during which he allegedly failed to report the sale of approximately $3.7 million worth of Bitcoin.

      These unreported sales resulted in substantial capital gains, part of which was used to purchase a residence.

      The indictment also accuses the individual of structuring cash deposits to evade currency transaction reporting requirements, further complicating the case.

      A Historic Prosecution

      This prosecution is notable not just for its focus on cryptocurrency but because it represents what is believed to be the first-ever criminal case concerning the tax implications of legal source crypto transactions in the United States.

      Implications of the Case

      The charges underscore the IRS’s stance: the vast majority of digital asset transactions are taxable and must be reported.

      With the IRS placing the crypto question prominently on tax forms, the message is clear—ignorance or avoidance of reporting digital assets is fraught with legal peril.

      This case serves as a stark reminder of the consequences of failing to comply with tax obligations related to cryptocurrency gains.

      The Importance of Reporting and Compliance

      As digital currencies continue to integrate into the mainstream financial ecosystem, the IRS and the DoJ are signaling their intent to rigorously enforce tax laws in this domain.

      For cryptocurrency investors and users, this case underscores the importance of maintaining meticulous records and ensuring all taxable transactions are accurately reported.

      Presumption of Innocence

      It’s crucial to remember that an indictment is merely an allegation, and the defendant in this case is presumed innocent until proven guilty in a court of law.

      However, if convicted, the charges carry substantial penalties, including potential prison time for each count of structuring and filing false tax returns.

      US Historic Crypto Tax charges – Conclusion

      This landmark case is a wake-up call to all who engage in cryptocurrency transactions to take their tax reporting obligations seriously.

      With the IRS and federal prosecutors now actively pursuing legal actions against tax evasion in the crypto space, ensuring compliance has never been more critical.

      Further, one suggests the rest of the world is likely to follow suit.

      Final thoughts

      If you have any thoughts on this article regarding US Historic Crypto Tax charges, or any US tax matters, then please get in touch.

    2. Israel’s novel approach to crypto taxes

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      Israel crypto tax update – Introduction

      The Israeli Tax Authority is ushering in a new era of cryptocurrency regulation with the introduction of a novel procedure designed to streamline tax payments on digital currency profits.

      This groundbreaking approach is a direct response to the challenges faced by digital currency owners, particularly the reluctance of many Israeli banks to process deposits from cryptocurrency transactions due to concerns about money laundering and terrorism financing.

      Key Features of the New Tax Procedure

      Pilot Program

      Scheduled to commence at the beginning of 2024, this six-month pilot program will enable cryptocurrency holders to pay their taxes directly to the Tax Authority.

      Dealing with Bank Refusals

      Owners will declare their profits and provide proof of a local bank’s refusal to accept their funds.

      This facilitates a solution for those impacted by bank hesitancy.

      Flexible Payment Options

      Payments can be made from foreign bank accounts in low-risk countries or via digital currency trading companies.

      Israeli Supreme Court’s Landmark Decision

      Overview

      In October 2023, the Israeli Supreme Court made a crucial decision impacting digital currency trading.

      This decision, influenced by a petition from Bits of Gold and the Israeli Bitcoin Association, clarified that Israeli banking laws accommodate banks’ engagement in digital currency transactions.

      The Court’s Findings

      Recognition of Digital Assets

      The Court recognized digital currencies as assets within the financial sector, falling under the operational scope of banks.

      Permission for Bank Involvement

      Banks are authorized to engage in digital currency-related activities, aligning with the interpretation of the Banking Law.

      Call for Regulation

      The Bank of Israel and the banking system are urged to concentrate on regulating the integration of digital currencies.

      Implications for the Financial Sector

      This initiative by the Israeli Tax Authority, complemented by the Supreme Court’s ruling, marks a significant shift in the financial and regulatory landscape.

      It not only legitimises digital currencies but also encourages responsible and regulated engagement with them.

      Israel crypto tax update – Conclusion

      Israel’s progressive steps towards integrating digital currencies into its financial and tax systems demonstrate a forward-thinking approach.

      This development is a bellwether for other nations contemplating the incorporation of digital currencies into their economic frameworks.

      Final thoughts

      For further information or assistance regarding this Israel crypto tax update or the taxation of digital currencies in Israel more generally, then feel free to get in touch.

    3. Italy NFT and Cryptoasset Tax 

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      Italy NFT and Cryptoasset Tax  – Introduction

      In a rapidly evolving digital world, Italy’s stance on the taxation of crypto-assets has taken a significant step forward.

      The Italian Revenue Agency’s Circular Letter No. 30/E, dated 27 October 2023, sheds light on this, offering operational guidelines aligned with the 2023 Budget Law.

      This development is relevant for both individual investors and institutions accessing the  world of cryptocurrencies and digital assets.

      Defining Crypto-Assets

      Crypto-assets are digital representations of value or rights, easily transferable and storable via distributed ledger or similar technologies.

      They encompass various types, including payment tokens, security tokens, utility tokens, and non-fungible tokens (NFTs).

      Tax Implications on Capital Gains

      The Circular outlines that capital gains from sales, redemptions, exchanges, or holdings of crypto-assets fall under Article 67, paragraph 1, letter c-sexies, of the Income Tax Consolidation Act (Tuir).

      These gains are subject to a substitute tax rate of 26%. Notably, the exchange between cryptocurrencies with identical economic functions is not tax-relevant.

      However, transactions involving NFTs and cryptocurrencies are considered taxable events.

      Calculation of Capital Gains and Losses

      The taxable base for capital gains is calculated per Article 68, paragraph 9-bis, of the Tuir.

      It’s based on the difference between the sale’s consideration or fair value and the acquisition cost.

      Moreover, the deduction of capital losses is permissible, albeit under specific conditions.

      Extended Regimes for Crypto-Asset Holders

      Crypto-asset holders can now benefit from the Administrated Savings and Managed Savings regimes, broadening the scope of financial planning and investment strategies.

      Tax Monitoring Obligations

      Resident individuals, non-commercial entities, and Simple Partnerships in Italy must report their foreign-held crypto-assets in the RW Box of their Income Tax Return, emphasizing transparency and compliance.

      Redetermination Opportunity for Holders

      For those holding crypto-assets as of 1 January 2023, there’s an option to re-determine their cost or purchase value as of that date.

      This re-determined value is subject to a 14% substitute tax, applicable even if the assets are no longer held at the time of payment.

      VAT and Stamp Duty Considerations

      The Circular aligns with international VAT best practices for cryptocurrencies used exclusively as payment means in VAT-subject transactions.

      Some crypto operations, like virtual currency exchanges or mining, are exempt from VAT.

      Additionally, stamp duty applies to periodic communications concerning crypto-assets.

      Inheritance and Gift Tax

      To ascertain the taxable base for inheritance and gift tax, the fair market value at the time of succession or donation is critical.

      Regularisation Opportunity

      For those who haven’t declared crypto-assets in their tax returns, a regularization window is available until 30 November 2023, with reduced penalties.

      This opportunity extends to undeclared income derived from crypto-assets.

      Determining the Territoriality

      The Circular provides guidelines on the territoriality of crypto-assets, focusing on the location where access keys are held to determine if the income is produced in Italy.

      Italy NFT and Cryptoasset Tax – Conclusion

      Italy’s latest guidelines on crypto-assets taxation reflect a growing trend of regulatory bodies adapting to the digital age.

      These guidelines offer clarity and a framework for individuals and businesses engaging in cryptocurrency transactions, ensuring compliance while navigating this emerging financial landscape.

      Final thoughts

      If you have any queries about this article on Italy NFT and Cryptoasset Tax, or Italian tax or crypto tax in general, then please get in touch.

    4. Canadian Crypto Tax Insights from CRA’s Recent Roundtable

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      Canada Crypto Tax – Introduction

      In the rapidly evolving landscape of cryptocurrencies, clarity on taxation remains a crucial concern for both users and intermediaries.

      In a recent roundtable discussion between the Canada Revenue Agency (CRA) and the Association de planification fiscale et financière (APFF), the CRA offered insights and guidelines on several critical issues related to the taxation of cryptocurrencies.

      Transferring crypto to platform

      A scenario presented to the CRA involved a taxpayer holding bitcoins in a cryptocurrency wallet, transferring these bitcoins to a centralized platform for exchanging and lending crypto assets.

      The platform offered a variable return of approximately 4% per year in bitcoin in exchange for the deposit.

      The platform’s terms included rights to pledge, sell, or lend the bitcoins, with profits from these actions belonging to the platform.

      The depositor had withdrawal rights, and withdrawals were paid from a pooled wallet containing bitcoins from various clients.

      The crucial query posed was whether this transfer constituted a “disposition” for tax purposes, potentially leading to the realization of a gain, loss, capital gain, or capital loss upon the transfer.

      The CRA’s opinion leaned towards considering the taxpayer’s deposit as a disposition, as the platform effectively acquired rights to use, profit from, and dispose of the assets, transferring ownership away from the taxpayer.

      This stance by the CRA highlights the necessity for tax advisors to scrutinize the terms and conditions of platforms for both the platform operators and their customers.

      The determination of whether a disposition has occurred relies on assessing possession and economic risk linked to the property, rather than accepting a platform’s terms stating otherwise.

      The discussion also shed light on the changing landscape of crypto asset lending platforms. Over the past 24 months, these platforms offering returns on cryptocurrency deposits have seen a decline.

      Regulatory bodies such as the U.S. SEC and the Autorité des marchés financiers du Quebec clarified that crypto asset deposit accounts fall under securities, requiring compliance with securities laws. Notably, prominent U.S.-based lending platforms faced insolvency protection in 2022.

      In Canada, custodial crypto asset trading platforms (CTPs) are regulated as dealers under applicable securities law.

      They must explicitly state in their terms that crypto assets are held separately for clients. Unlike the terms of crypto asset lending platforms, transfers to CTPs might not generally constitute a disposition, subject to specific circumstances.

      Other scenarios discussed

      Moreover, the CRA addressed two other cryptocurrency taxation scenarios during the roundtable:

      1. Loss due to exchange fraud or theft: The CRA suggested that losses due to centralized exchange fraud or theft should be eligible for tax realization.
      2. Proving business loss upon platform bankruptcy: The CRA outlined evidence, including documentation of fraud/bankruptcy, account activation, contracts, claims filed, recovery proceedings, and evidence of unsold cryptocurrency.

      Canada Crypto Tax – Conclusion

      The insights from the CRA’s discussion offer valuable guidance, emphasizing the need for a nuanced understanding of terms and conditions within crypto platforms.

      Further, it highlights the need to maintain meticulous records for taxation purposes in the evolving cryptocurrency landscape.

       

      If you have any queries on Canada Crypto Tax, or other Canadian tax matters, then please get in touch.

    5. Swiss crypto taxes – An update

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      Swiss crypto taxes: Introduction

      In the ever-evolving world of cryptocurrency taxation, staying informed is paramount.

      On 19 October 2023, the Swiss Federal Tax Administration made significant updates to its tax information regarding cryptocurrencies.

      Let’s take a peak under the digital bonnet and see what they said…

      Non-Fungible Tokens (“NFTs”)

      General

      At one point, NFTs looked to be taking over the world – one ape at a time.

      However, the wind has been taken out of their sails during the so-called ‘crypto winter’. Even apes suffer from frostbite!

      If it were needed, the Swiss Federal Tax Administration has put forward a comprehensive definition, characterising NFTs as cryptographically unique, indivisible, irreplaceable, and verifiable assets.

      They represent specific objects, whether digital or physical, on a blockchain, and each NFT exists only once, rendering it unshareable or replaceable.

      There is nothing of surprise here.

      However, it’s worth noting that the definition mainly aligns with the traditional notion of NFTs. It perhaps does not address ERC-1155 NFTs, which can represent both fungible and non-fungible tokens in a single smart contract.

      This is symptomatic of the fact that, despite the best will in the world, authorities are always behind the curve.

      Tax position for NFTs

      The purchase and sale of NFTs, according to Swiss tax authorities, are generally treated like traditional asset transactions.

      Income tax implications do not arise from NFT purchases, as these transactions don’t alter the buyer’s assets.

      Transaction costs related to the purchase are not tax-deductible for non-professionals, as they pertain to asset swapping rather than management. Profits or losses incurred during NFT sales are not considered.

      However, royalties paid to NFT creators during various transfers are subject to income tax as intangible asset income..

      For companies, corporate income tax considerations come into play.

      The difference between the purchase and sale prices, along with license fees, is considered taxable income or expenses.

      As for withholding tax, the Swiss Federal Tax Administration emphasizes that NFT transactions are generally not subject to it, as they do not typically constitute income from movable assets.

      Ultimately, it stresses, the tax position must be determined on a case by case basis.

      Airdrops

      Airdrops have become a popular way for blockchain projects to distribute crypto-assets to specific individuals.

      The tax implications of airdrops are addressed in the new update.

      In principle, tokens received via airdrops by individuals taxable in Switzerland are considered taxable.

      The nature of the airdrop, whether it falls under general income, employment relationships, returns on movable assets, or certain exemptions, depends on its structure.

      There are specific considerations for airdrops that resemble promotional games, which could be tax-exempt up to CHF 1,000, provided certain conditions are met.

      Conclusion

      This update from the Swiss Federal Tax Administration represents a positive step in clarifying the tax consequences of the crypto ecosystem.

      However, the complexity of the crypto-tax landscape remains.

      Precise tax planning is essential for crypto-related and FinTech projects, as case-by-case analysis often holds the key to understanding and complying with the evolving tax regulations.

       

      If you have any queries about Swiss crypto taxes, Swiss taxes in general, or any other tax matters then please get in touch.

    6. Cryptocurrency to be disclosed for Income Tax

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      Introduction

      Cryptocurrency investors in India have long been wondering whether they need to disclose their holdings to the income tax authorities.

      The answer is now clear: yes, you do.

      New Indian tax regime for crypto

      The Indian government has introduced a new tax regime for cryptocurrency, which includes a 30% tax on gains from the sale of VDAs (virtual digital assets).

      The new rules also require investors to disclose their holdings on their income tax returns.

      Crypto flight?

      This change has prompted some investors to consider transferring their holdings to offshore exchanges or wallets in an attempt to avoid taxes.

      However, it is important to note that this could have serious consequences.

      The Foreign Exchange Management Act (FEMA) prohibits the transfer of foreign assets without prior permission from the Reserve Bank of India.

      If you are caught transferring your cryptocurrency holdings to an offshore exchange or wallet without permission, you could face severe penalties.

      Therefore, it is advisable to declare your cryptocurrency holdings on your income tax return, even if they are held in an offshore account. This will help to protect you from any potential legal problems.

      Indian crypto tax – Conclusion

      The new tax rules for cryptocurrency are complex, so it is important to seek professional advice if you are unsure about your obligations.

      However, by following the above guidance, you can ensure that you are compliant with the law and avoid any potential penalties.

      Indian crypto tax: Tips for disclosing your cryptoholdings on your income tax return:

      • Keep accurate records of all your cryptocurrency transactions.
      • Use the new Schedule- Virtual Digital Assets section of the IT Form to report your gains and losses.
      • If you have transferred your holdings to an offshore exchange or wallet, be sure to declare them as foreign assets.
      • Seek professional advice if you are unsure about your obligations.

      By following these tips, you can ensure that you are compliant with the new tax rules for cryptocurrency and avoid any potential penalties.

      If you have any queries about Indian crypto tax or Indian tax matters in general, then please do not hesitate to get in touch.

      The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article

    7. Payments of cryptocurrency as earnings

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      Introduction

      This article considers the tax implications of an employer making payments to its employees in cryptocurrencies such as bitcoin and Ethereum.

      The German authorities have determined that cryptocurrency is not any of the following:

      • a foreign currency;
      • legal tender; or
      • property

      Is crypto non-cash compensation?

      If cryptocurrencies are given to employees for nil, or under market, consideration in exchange for providing their services then this is likely to be taxable earnings.

      This ‘remuneration’ could be:

      • a cash payment within the meaning of Section 8 (1) of the German Income Tax Act (EStG); or
      • a payment in kind within the meaning of Section 8 (2) sentence 1 of the EStG. Pursuant to Section 107 (2) of the Trade, Commerce and Industry Regulation Act (GewO)

      What is the tax position on such payments?

      First of all, payments of emuneration in cryptocurrencies is taxable This is the case regardless of whether it is a cash benefit and as a benefit in kind.

      The tax is levied on employees as wage tax in accordance with Section 38 of the German Income Tax Act (EStG). The tax point is at the time of the ‘inflow’ of the cryptoassets.

      The tax authority will only accept euros for the payment of payroll taxes.

      As such, where remuneration is paid wholly (or the majority is paid) in cryptocurrency, then some of it will need to be sold or exchanged for immediately for fiat in order to pay the tax.

      How will the tax authority ever know?

      This must be the most asked question to tax advisers around the world!

      However, the tax office learns about cryptocurrencies through various sources, including the reporting obligations that are imposed on employers.

      In addition, many crypto intermediaries require identification in order to use their marketplaces so cryptocurrencies are not as anonymous as many might believe. Indeed, transactions on the blockchain are immutable and, by and large, fully traceable.

      Further, the tax authorities can also make targeted inquiries in accordance with Section 93 of the German Fiscal Code (AO) in order to obtain information.

      If you have any queries about cryptocurrency or the cryptoassets in Germany, or German tax more generally, then please do not hesitate to get in touch.

      The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.

    8. Germany cryptocurrency tax: clarification issued

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      Germany cryptocurrency tax: Introduction

      In an eagerly anticipated announcement, the German Federal Ministry of Finance (BMF) has clarified its view on the taxation of cryptocurrencies.

      In addition to the position on the buying and selling of crypto, the guidance also sets out the position on activities such as mining, staking, lending, and other transactions.

      The nature of cryptocurrencies

      The German tax man has determined that units of cryptocurrencies are economic goods. These ‘goods’ are attributable to the owner as the holder of the private key.

      In cases where the wallet and private key is managed by a third party provider (such as Coinbase or Binance) then the asset is attributable to the beneficial owner of the cryptoassets.

      Key issue: Private activity v commercial activity

      Like many jurisdictions, the key issue for determining the tax position on any profits generated is whether the transactions take place through personal activity or in the conduct of a commercial activity.

      In this regard, the BMF has confirmed that investors who hold their cryptocurrency as personal assets can sell them free of tax as long as they hold the assets for at least one year.

      This is welcome as, in previous missives, the BMF had stated that the holding period was ten years for private investors.

      This one-year period does not apply if the cryptocurrency is held as business assets.

      Again, as per other jurisdctions, in many cases the distinction between commercial and private activity might be a blurred one and is an area ripe for dispute.

      It should be noted that if cryptocurrencies are held by a domestic corporation such as a GmbH then the income is always considered to be commercial.

      Mining and Forging activities

      The authorities have also set out the position for other blockchain activities including:

      • Mining in a proof of work consensus mechanism; and
      • Forging in a proof of stake consensus mechanism

      It seems to be the case that the German tax authorities will assume that such activity is commercial in nature.

      The block creation leads to an acquisition (not to a production!) of the asset, which has to be recognized at the market price at the time of acquisition (profit-increasing). Only at the time of the realization of the proceeds from a future sale are any acquisition costs to be deducted from the profit.

      Only the staking (without taking over the block creation), as well as, if applicable, the participation in mining and staking pools or a cloud mining service may again fall within the scope of private asset management. However, again, this depends on the individual case.

      Airdrops

      The authorities has also set out its view on the acquisition of cryptocurrencies received by private investors in the context of airdrops. Here, the receipt of the new tokens may be taxable where the recipient of the airdrop has dome something in return for the airdrop.

      Perhaps surprisingly, the authority considers it sufficient for this purpose that the recipient is required to provide contact details on an online form.

      Where nothing is done in return for the airdrop then there are no tax consequences (although German gift taxes might be in point on the receipt).

      ConclusionGermany Cryptocurrency tax

      Of course, this additional clarity is helpful. Of course, the fact that an private investor can dispose of assets free of tax after 12 months is very welcome for relevant investors.

      It remains to be seen whether there will be further missives from the German tax authorities that include their position regarding Non‑Fungible Tokens (NFTs) and other types of assets and activities.

      If you have any queries about this article, German cryptocurrency tax, or the matters discussed more generally, then please do not hesitate to get in touch.

      The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article

      For further resource on crypto assets please see www.cryptotaxdegens.com.

    9. Portugal crypto tax: Buying and selling crypto assets in Portugal

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      Introduction – Portugal crypto tax

      Portugal is often held up as an attractive place for crypto investors. More generally, it has an attractive regime for migrants moving to Portugal, who might be able to avail themselves of its Non-Habitual Residence (“NHR”) regime.

      However, where the NHR regime is clear, the tax law around crypto-assets is more as a result of what the law does NOT say.

      Portugal as a growing hub for crypto

      As stated above, Portugal has become a popular destination for those seeking a safe harbour for crypto gains.

      It is estimated that between March and May 2020, the purchase and sale of cryptocurrencies in Portugal increased by 60% year on year. However, up until now, the Government has not acted to clarify or expand its legislation to cater for this relatively new asset.

      Current position

      In Portugal, there are three potential categories under which gains on the buying and selling of cryptocurrencies could be caught. These are as follows:

      • Capital Gains (Category G) – such as sale of an apartment or shares
      • Capital Yields (Category E) – such as property rental or dividends
      • Professional Income (Category B) – Consultancy fees etc

      In respect of the first of these, the tax code specifies which cases will be subject to tax a as a capital gain. However, the class of items is an exhaustive list. In other words, the law only applies to something which is on the list. As crypto assets are not on the list they are not taxable.

      In respect of Category E, this does not apply as the buying and selling of cryto-assets is not a yield on capital.

      Category B is the one where we might fall into the tax trap. However, it is only likely to apply to certain cases. This category will apply where any crypto profits are as a resuly of a regular professional activity. Of course, this might be relatively easy to determine in extreme cases, but the lack of certainty for those in more marginal cases is a concern.

      A change in the winds?

      The current position means that Portugal is on a list of countries that still do not tax profits from this type of asset. Hence, why Portugal has become an attractive destination for crypto investors.

      However, nothing lasts forever.

      Indeed, on 13 May 2022, finance minister Fernando Medina confirmed that the Government is contemplating how it might tax crypto gains in the future. He did say there were no firm proposals to introduce any such legislation.

      If profits from the buying and selling of crypto assets was brought into the tax net in Portugal, then it would seem likely they would be subject to tax at 28%.

      However, Mr Medina did acknowledge that an imposition of high levels of tax might “bring revenue down to zero” so he is at least aware of the tight rope his Government might be treading.

      If you have any queries about this article, Portugal crypto tax, or the matters discussed more generally, then please do not hesitate to get in touch.

      The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.

      For further resource on crypto assets please see www.cryptotaxdegens.com.

    10. Crypto tax Ireland – Buying and selling crypto

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      Introduction – crypto tax Ireland

      Like most jurisdictions around the world, there are no specific tax rules that apply to the buying and selling crypto assets in Ireland.

      Therefore, like those other jurisdictions, the tax position on the sale of crypto assets will be subject to general Irish tax law principles. 

      In addition, the Irish Revenue has also issued guidance in some particular areas.

      This article will mainly discuss cryptocurrencies – such as bitcoin, Ethereum and Dogecoin. The position for non-fungible tokens (“NFTS”) and other digital assets might differ.

      Buying cryptocurrency

      As one might surmise, the purchase of cryptocurrency is unlikely to give rise to any direct tax implications. For instance, there is no stamp duty on crypto assets (as there might be on the purchase of shares, for instance). Further, it is unlikely there will be any VAT implications where we are looking at an investor or trader buying and selling crypto-assets.

      However, the purchase of the cryptocurrency will be relevant for determining the base cost of the crypto when the investor decides to sell the assets.

      Sale of crypto-assets by individuals

      General

      The Irish tax position will depend on the Irish residence position of our crypto-investor. Specifically, whether they are:

      • Resident for tax purposes in Ireland; or
      • They are not resident for tax purposes in Ireland

      Irish resident individuals selling cryptocurrency

      If an Irish resident individual sells such an asset at a gain then it will usually be subject to capital gains tax. This is currently 33%. 

      Where the disposal results in a loss, then this capital loss can generally be:

      • Used in the current year against other gains; or
      • Carried forward to future years

      The position is slightly different if the person is carrying on a ‘trade’ of dealing in crypto. Here, any profit on the sale of crypto would be subject to income tax. Marginal income tax rates of up to 55% – where one includes social charges – might therefore be payable. 

      It is worth noting that a trading classification is only likely in exceptional cases with the trading needing to be carried out in a deliberate and commercial fashion.

      Non-resident individual

      A non-Irish resident individual (who is also non-ordinarily resident) is liable to Irish CGT on gains arising in Ireland from the disposal of Irish ‘specified’ assets only (e.g. land and buildings in Ireland). As such, crypto gains should not be taxable.

      Sale of crypto-assets by Companies

      An Irish resident company that disposes of crypto at a gain will be subject to capital gains tax at 33%.  Similarly, losses will also be treated in the same way as set out above for individuals.

      Where such a company conducts a ‘trade’ of dealing in crypto, then it’s profits will generally be subject to corporation tax at 12.5%. 

      Again, the threshold at which activities might be considered a trade is a high one. However, it is generally thought that a company might satisfy this more easily than an individual.

      Mining cryptocurrencies

      General

      The Irish Revenue has not provided any guidance on the position when it comes to the mining of cryptocurrencies. 

      If they follow the UK tax authorities position on the same activity, then the treatment will depend on whether:

      • The person is conducting a trade of mining crypto; or
      • The person’s activities fall short of a trade

      Trade

      Here, the person will be taxable on the trading profits generated from the mining activities.  

      A company will pay tax at 12.5% but an individual will be subject to tax at their marginal rates.

      No trade

      Where the activities fall short of a trade, then the income received by the person will be treated as ‘miscellaneous’ income. 

      Miscellaneous income tends to qualify for fewer reliefs than trading income.

      A company will pay tax at 12.5% but an individual will be subject to tax at their marginal rates.

      If you have any queries about this article, crypto tax in Ireland or the matters discussed more generally, then please do not hesitate to get in touch.

      The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article

      For further resource on crypto assets please see www.cryptotaxdegens.com.