Crypto tax situation - Read post 1 for thread banned users

Peregrinus

jonny_b wrote: »

If you can't provide receipts say for instance you invested €500 and made a profit of 60k. You knew it was a €500 investment but we're happy to pay the 33% CGT on the €60500. Is that what would generally happen if you can't provide proof?

Unlikely with a crypto transaction that you couldn't produce any documentation to corroborate your story of how you acquired the crypto - presumably you have an account with a crypto exchange or other intermediary, and a record of your transactions on that account can be generated.

But, hypothetically, if you have sold an asset for €60k, claim that you acquired it for €500, and have no evidence to corroborate this, they are likely to accept your story, because this is clearly not a story invented to minimise your tax liablity. If your claim was that you acquired it for €50k, now, and so only have a €10 gain, they'll give you a hard time.

Mellor

Peregrinus wrote: »

... presumably you have an account with a crypto exchange or other intermediary, and a record of your transactions on that account can be generated.

The account that purchased the crypto may no longer exist.
It's not unreasonable to aggregate all purchases into on exchange or wallet. If you closed an old account, records may be lost.

Peregrinus

Mellor wrote: »

The account that purchased the crypto may no longer exist.
It's not unreasonable to aggregate all purchases into on exchange or wallet. If you closed an old account, records may be lost.

That's true.

In which case, if you paid real money to acquire your crypto and want to treat that as a cost of acquisition to reduce your CGT liability on eventual disposal, for the love of God print off and keep a full transcript of your account before you close it. The Revenue are not going to deal sympathetically with a taxpayer who has no records of his acquisition costs because he deleted them.

Mistermu

Bob24 wrote: »

If he is still working here, he definitly is a tax resident (or ordinarily resident). But this isn't the only deciding factor.

I don't want to give direct tax advice and your friend should satisfy himself that he understands the tax rules and act accordingly, but the following quotes from this document should give directions (as you can see, being "domiciled" in Ireland or not does make a difference):

Has anybody been in touch with a tax advisor in relation to the remittance basis of taxation being applicable to cryptocurrencies for non domiciled residents?

Bob24

meanpeoplesuck wrote: »

Does the "8 year rule" apply to crypto in Ireland?

Eg. If you bought BTC in 2013, you'd have to pay CGT of 33% on all of it in 2021 even if you only want to sell a tiny amount?

I assume you are referring to the deemed disposal and exit tax legislation?

If yes, the tax is actually 41% every 8 years even when you don't dispose of the asset. But it only applies to mutual funds and ETF type of products.

I.e. not to individual crypto holdings. It would only apply of you bought shares in a fund/ETF/ETP/ETN filled with crypto and which is domiciled in the EEA (there are now some, but they wouldn't have existed 8 years ago).

meanpeoplesuck

Thanks Bob.

That's exactly what I was asking about.

So it's possible to sell a portion of your crypto, pay your taxes, and be fully compliant. But you still have the rest of your holdings untouched.

Appreciate the information!

Bob24

meanpeoplesuck wrote: »

Thanks Bob.

That's exactly what I was asking about.

So it's possible to sell a portion of your crypto, pay your taxes, and be fully compliant. But you still have the rest of your holdings untouched.

Appreciate the information!

No worries.

Yes for sure. If you are only selling a portion of your holdings, you only pay CGT on that portion.

The FIFO rule applies to match what you are selling with what you had bought in the past and calculate your gains (except if you are buying and selling within 4 weeks in which case there is an exception).

And for your reference if you have ETFs the exit tax is due every 8 years no matter what (even if you aren’t selling anything). This is a crazy tax but that’s the law.

actuallylike

So it appears that staking returns is a kind of grey area, but is the action of staking itself taxed? Lots of tokens take this x model, where you deposit your token and receive an interest bearing token in return (e.g. Stake SUSHI, receive xSUSHI in return). It looks like it could be considered a swap of sorts.

Is this transfer of assets considered a taxable event as it appears you're disposing of an asset (the SUSHI) .

So, if I bought SUSHI at $2 and then started staking it when it was $15, do I now owe tax on the $13 gain? If so, it makes DeFi completely unusable if there's a huge tax for nearly every token movement within defi.

Mellor

I’d say no as you still own the SUSHI. It’s never disposed of.

actuallylike

Mellor wrote: »

I’d say no as you still own the SUSHI. It’s never disposed of.

I don't think I do own the SUSHI though, xSUSHI and SUSHI are two different ERC20 tokens, albeit someway pegged to each other?

For example, I can borrow xSUSHI from protocols like AAVE using collateral that isn't SUSHI, so there is ways of obtaining xSUSHI without having SUSHI.

I can also swap my xSUSHI for something other than SUSHI, which looks like another disposal of an asset.

Mellor

actuallylike wrote: »

For example, I can borrow xSUSHI from protocols like AAVE using collateral that isn't SUSHI, so there is ways of obtaining xSUSHI without having SUSHI.

There are many ways to obtain tokens and coins. But your example didn't involved those other ways, you said;

actuallylike wrote: »

So, if I bought SUSHI at $2...

So in that example, you bought sushi. Why would you not own it.

I can also swap my xSUSHI for something other than SUSHI, which looks like another disposal of an asset.

Of course you can. You can trade for another token, or for fiat. From when you own it it's treated like any other asset you own.
But that's outside of the scope of the question about staking.

Bob24

actuallylike wrote: »

So it appears that staking returns is a kind of grey area, but is the action of staking itself taxed? Lots of tokens take this x model, where you deposit your token and receive an interest bearing token in return (e.g. Stake SUSHI, receive xSUSHI in return). It looks like it could be considered a swap of sorts.

I think "staking" is a grey area largely because it can mean different things depending on the token/platform which is using that word.

If it simply means that you are depositing your crypto somewhere, receiving a regular reward* for that deposit, and eventually recovering you principle then I think the situation is clear. There is no CGT because you never disposed of anything, and there is income tax due on the reward amount you received (based on the EUR fair value on the day you received each payment - i.e. it doesn't matter whether the payment is made in a different crypto than the one you deposited as long as the original capital remains untouched). I would say things like ETH 2.0 staking, Crypto.com staking rewards, Celsius interest rewards, etc all fall into that category.

Now if it means you are providing funds to a liquidity pool in cryptocurrencies and your cryptos are swapped and *replaced* by others, then it could possibly trigger CGT. It really is a new area and I don't think you will find specific guidance from revenue, but I think something like Uniswap Liquidity Pools fall in this situation (I am not familiar with Sushi but from what you mentionned I assume it works in the same way?).



* It could also be called interest on some platforms but I am using the generic word reward on purpose, as to my understanding from Revenue's perspective this is subject to income tax rather than DIRT

Mellor

Bob24 wrote: »

There is no CGT because you never disposed of anything, and there is income tax due on the reward amount you received.

I don’t think that’s correct.
Mining is subject income as it’s providing a service for payment. Agree there.

But staking/holding/depositing on a platform is not performing a service for payment. It’s just holding in a way that earns a reward.

The closest parallel would be bonus shares. Where holders of existing shares are rewarded bonus shares they are subject to CGT, not income tax.

I still think revenue has to solidify it that crypto is a security.
But it’s that’s their angle, they it should apply acrid the board. Can’t pick and choose imo.

It could also be called interest on some platforms but I am using the generic word reward on purpose, as to my understanding from Revenue's perspective this is subject to income tax rather than DIRT

Dirt is only payable with financial institutions. I can’t see how it could currently apply to crypto.

Bob24

Mellor wrote: »

I don’t think that’s correct.
Mining is subject income as it’s providing a service for payment. Agree there.

But staking/holding/depositing on a platform is not performing a service for payment. It’s just holding in a way that earns a reward.

The closest parallel would be bonus shares. Where holders of existing shares are rewarded bonus shares they are subject to CGT, not income tax.

Agree Revenue should really clarify their position, but Koinly as well as a tax firm guidance posted on the thread before are saying this is subject to income tax.

The way I see it, the service you are providing is that you are lending your crypto to someone and in exchange they are paying you compensation for the service (and depending on where you are staking, that compensation can actually be paid in the same crypto, in another crypto, or possibly in fiat currency so I think it is hard to argue this is capital appreciation of your existing asset - you are receiving something else).

Mellor wrote: »

Dirt is only payable with financial institutions. I can’t see how it could currently apply to crypto.

If an Irish tax resident has deposit accounts abroad and is receiving interests on them, they are meant to file a tax return and pay DIRT on those interests directly to Revenue (since the foreign financial institution wouldn't have deduced it at source). So if Revenue was considering the likes of Celsius and BlockFi as financial institutions paying interest on deposit accounts for the purpose of tax liabilities, DIRT would be due. But yes, I don't believe this is the case either - this is what I meant to clarify in my note explaining why I intentionally didn't used the word "interest" even though some platforms do use it (but again Revenue could at some point express a different view).

Mellor

Bob24 wrote: »

Agree Revenue should really clarify their position, but Koinly as well as a tax firm guidance posted on the thread before are saying this is subject to income tax.

Koinly has no bearing on the Irish tax though.
There’s literally a page on revenue describing now bonus shares/securities are retreated.

I can’t see how they can justify waiving that in regards to crypto so as to charge a higher tax. Revenue said there are no special rules for crypto.

The way I see it, the service you are providing is that you are lending your crypto to someone and in exchange they are paying you compensation for the service

That’s exactly how the entire banking system works. If that counted as a service for income, then term deposits, savings accounts should be subject to income tax. But they aren’t.

So if Revenue was considering the likes of Celsius and BlockFi as financial institutions paying interest on deposit accounts for the purpose of tax liabilities, DIRT would be due..

If they were to take that view they’d collect dirt on staking. And lose CGT due on the “deposits”. It’s one or the other.

Securities that attract DIRT are the likes of government bonds that pay interest.
Stock dividends are classed as income.

The parallel to crypto would be token/staking that paid interest in fiat - at in that case it wouldn’t attract CGT.

I assume income tax is >33% for most investers, so I wouldn’t be going out of my way to declare my holdings as crypto.

actuallylike

Mellor wrote: »

So in that example, you bought sushi. Why would you not own it.

Thanks for the response, it really is uncharted territory so appreciate the input.

Maybe instead of bought, we should say swap. Say I swapped ETH for SUSHI on uniswap. afaik, I owe cgt on the difference of the ETH at the point of swap and the point from when I bought the ETH. My understanding of cgt is based on that so correct me if I'm wrong.

When I stake my SUSHI, I receive xSUSHI, not an NFT, a brand new ERC20 token. I don't see the difference between staking in this scenario and swapping on uniswap. They both result in a disposal of an asset, because I don't have the SUSHI anymore, I have a brand new independent token (xSUSHI).

If cgt is not applicable at this point, what about if I swap my xSUSHI on uniswap (which I'm able to do). Say I swap.it immediately after staking. If my first paragraph is right, my gains since I obtained the xSUSHI is effectively nil, because I've just obtained it. Is that way to avoid the cgt on the SUSHI? Surely not.

I guess my main issue is with swapping for items that are pegged in some way to each other. For example, I swapped some of my BTC for WBTC earlier in the year for use on Ethereum. They're pegged, but I probably have to pay cgt on the gain from when I first bought the btc right?

Mellor

actuallylike wrote: »

Maybe instead of bought, we should say swap. Say I swapped ETH for SUSHI on uniswap. afaik, I owe cgt on the difference of the ETH at the point of swap and the point from when I bought the ETH.

Yes. You have disposed of your ETH. A swap is basically a trade.

When I stake my SUSHI, I receive xSUSHI, not an NFT, a brand new ERC20 token. I don't see the difference between staking in this scenario and swapping on uniswap. They both result in a disposal of an asset, because I don't have the SUSHI anymore, I have a brand new independent token (xSUSHI).

Say after 6 months you decide to unstake. You get your sushi back.
Staking is not a disposal. You still own the sushi.

If cgt is not applicable at this point, what about if I swap my xSUSHI on uniswap (which I'm able to do). Say I swap.it immediately after staking. If my first paragraph is right, my gains since I obtained the xSUSHI is effectively nil, because I've just obtained it. Is that way to avoid the cgt on the SUSHI? Surely not.

A swap is a trade. If you immediately trade for xsushi, you don’t make a gain on the xsushi. So no CGT.
But you still have a sushi. Whenever you unstake and dispose you’ll owe CGT on gains.

I probably have to pay cgt on the gain from when I first bought the btc right?

Yes. We just discussed this in the other thread.
It’s liable for CGT. But swapping just enough to step under the allowance would mean acquisition costs increase without CGT liability.

namloc1980

Is there a definitive Revenue view on the interest earned on crypto on the lives of Blockfi/Celsius?

Bob24

namloc1980 wrote: »

Is there a definitive Revenue view on the interest earned on crypto on the lives of Blockfi/Celsius?

Nope there isn’t unfortunately.

Legal advice here stating that “Passive income derived from the staking or lending of crypto-assets would be subject to income tax rather than CGT (similarly to interest income or dividend income from conventional investments)”: https://doylekeaney.ie/news/crypto-assets-high-level-irish-tax-considerations/

And also Koinly (which has an Ireland-specific tax engine for crypto transactions which they build based on legal advice here) are reporting BlockFi/Celsius/Crypto.com interests as liable for income tax on the tax reports they produce.

As you might have seen on the thread some posters will disagree and have different views, but I haven’t seen anyone posting more credible sources than the above 2 which would be addressing this specific point and stating something different. It would really be better if Revenue could clarify though as while those are opinions by tax professionals, they are not based on any official document. Saying that there is no specific tax rule for cryptocurrencies as Revenue have been doing really isn’t enough. It is all fine for basic stuff like CGT on simple purchases and disposals, but there are some things you can do with crypto which don’t always have a clear equivalent with other asset classes.

I guess someone could raise an inquiry on the Revenue website and ask, but based on previous experience I wouldn’t hold my breath for a clear answer (I suspect after weeks of waiting for an answer they would just come back with a vague statement which isn’t committing them to anything, along the lines of “there is no specific tax treatment for cryptocurrencies and the usual tax rules apply”).

Mellor

Bob24 wrote: »

Legal advice here stating that “Passive income derived from the staking or lending of crypto-assets would be subject to income tax rather than CGT (similarly to interest income or dividend income from conventional investments)”: https://doylekeaney.ie/news/crypto-assets-high-level-irish-tax-considerations/
.

Yes but traditional investments dividends and interest pay in FIAT. Subject to income tax as FIAT earnings.

But the occasion as that share holders are awarded bonus shares due to holdings. Those shares are not treated as income, they are subject to CGT under a recalculated acquisition cost.

If revenue insist crypto is a security. On what basis can they justify the above special treatment case.

Peregrinus

Traditional securities can generate payments to the holders which may in some circumstances be in the nature of income - dividends, interest - and in some in the nature of capital - bonus issues. It's the nature of the payment that matters, not the form in which it is made. Where the payment is periodic, like interest and ordinary dividends, or where is represents a distribution of profit or earnings which are themselves income in the underlying enterprise, then it's of the nature of income. But where it represents a distribution of capital, then it is of the nature of capital. And, yeah, there can be grey areas and doubtful cases.

So, there's no a priori reason why payments made to the holders of crypto should necessarily be income, or necessarily be capital. They can by either, depending on the nature of the payment. Whether the payment is made in fiat, in crypto or in kind is unlikely to determine the issue; a much more relevant consideration is why the payment is being made and how it is being funded.

People arguing for particular (and invariably favourable) tax treatment for crypto always focus on the ways in which crypto differs from other investments. I suspect that this approach is driven by wishful thinking. If you're trying to work out what view the revenue will take of a particular transaction or event involving crypto, the better course is not to focus on the ways in which that transaction/event differs from transactions/events involving more conventional investments, but on they ways in which it resembles them. That's probably going to give you a better guide as to how the revenue will think.

Bob24

Peregrinus wrote: »

Whether the payment is made in fiat, in crypto or in kind is unlikely to determine the issue;

Agree, and even though as you say it is unlikely to make a difference, interest on crypto deposits aren't necessarily paid in the same crypto anyway. They could be paid in anything (including the same crypto as the deposited amount, another crypto, or even possibly a fiat currency).

Peregrinus wrote: »

If you're trying to work out what view the revenue will take of a particular transaction or event involving crypto, the better course is not to focus on the ways in which that transaction/event differs from transactions/events involving more conventional investments, but on they ways in which it resembles them. That's probably going to give you a better guide as to how the revenue will think.

While I agree with this, I think it isn't always easy to put in practice and sometimes there are things going-on in crypto (especially related to De-Fi) for which it is hard to find an equivalent elsewhere (at least at an individual level - as DeFi tends to bring to the masses concepts which previously only applied to institutional entities, which are subject to different tax treatment). So some things are unfortunatly up for interpretation.

Peregrinus

Bob24 wrote: »

Agree, and even though as you say it is unlikely to make a difference, interest on crypto deposits aren't necessarily paid in the same crypto anyway. They could be paid in anything (including the same crypto as the deposited amount, another crypto, or even possibly a fiat currency).

Genuine question: is there much of a lending market in crypto? Does it happen on a sufficient scale for us to be able to identify prevailing interest rates for various different cryptos? Who borrows crypto, and what for?

Bob24 wrote: »

While I agree with this, I think it isn't always easy to put in practice and sometimes there are things going-on in crypto (especially related to De-Fi) for which it is hard to find an equivalent elsewhere (at least at an individual level - as DeFi tends to bring to the masses concepts which previously only applied to institutional entities, which are subject to different tax treatment). So some things are unfortunatly up for interpretation.

I think the first challenge is to understand what the transaction is. I do sometimes get the impression that people post on this forum enquiring about the tax treatment of various crypto-based transactions which they themselves do not understand, or at least which they struggle to explain. Of course the problem could be me, not them.

But the bottom line here is that when transactions are novel, in order to think about the tax treatment the first thing you need is a clear understanding of exactly what the transaction entails, and that understanding has to be shared by everyone in the conversation. Otherwise you're going nowhere fast.

Bob24

Peregrinus wrote: »

Genuine question: is there much of a lending market in crypto? Does it happen on a sufficient scale for us to be able to identify prevailing interest rates for various different cryptos? Who borrows crypto, and what for?

Yes it is actually large enough.

Both on the individual and institutional side, you have leveraged buyers and short sellers who need to borrow crypto to enable their transactions (similar to what you would have with stocks). Those transactions are usually short term but with very high interest rates which is why yields on crypto deposits are rather decent.

And on the institutional side, you also have entities borrowing crypto because they need it temporarily as part of a financial/investment operation (hedging against something else, liquidity requirements as part of an arbitrage strategy between different crypto markets, etc).

To make a comparison with “traditional” finance, when someone deposits crypto on Celsius or BlockFi for yield, it is very similar to signing-up for the Interactive Brokers “Stock Yield Enhancement Program”: https://www.interactivebrokers.com/en/index.php?f=46942
I.e. you are entrusting them to lend out your assets in order to generate yield, and in return they are sharing part of the profits with you (although crypto lending services tend to redistribute more of their profits to the asset owner compared to stock brokers - some brokers like DEGIRO even lend-out clients assets without sharing any of the profits).

Mellor

Peregrinus wrote: »

People arguing for particular (and invariably favourable) tax treatment for crypto always focus on the ways in which crypto differs from other investments. I suspect that this approach is driven by wishful thinking.

I understand that you’d suspect that. But in this case I am actually arguing the opposite. In that crypto should be treated as other securities are.
Additional tokens issued to token holder who have staked are by their nature more in line with bonus issues.
But this depends on the mechanics of the issue I guess

namenotavailablE

Mellor wrote: »

Additional tokens issued to token holder who have staked are by their nature more in line with bonus issues.

The additional tokens are a reward ('payment') in return for the cryptocurrency holder locking up the digital asset for staking purposes (i.e. enhancing the integrity/security of the network). Would this not suggest that they are taxable as income, as it seems to be a trade between 2 parties?

gordongekko

Interest is case iii income and subject to income tax. I'm not really sure how this is even a point for discussion.

Bob24

gordongekko wrote: »

Interest is case iii income and subject to income tax. I'm not really sure how this is even a point for discussion.

Yes, for me what is more open for discussion is when you take part in a DeFi liquidity pools. I.e. is it considered that you are actually forfeiting your assets to the liquidity pool in exchange for other assets in which case there could be CGT. Or that since you kind of have a guarantee that you can recover your original assets, it effectively is a deposit to the pool which is attracting income? I think this is very much open for discussion as I find it hard to identify similar transactions that individual taxpayers would make outside of DeFi.

But IMO it is pretty clear that regular rewards related to simple deposits on the likes of Celsius, BlockFi, or CDC don’t constitute asset price appreciation and are rather payments made to you by those services as profit-sharing related to them lending-out assets on your behalf. I am keeping an open mind for official of credible sources saying otherwise, as Revenue could have a strange view on this and at the end of the day their view is what matters, but I haven’t seen any to date (quite the opposite - the few legal opinions have I seen are all backing my personal understanding).

gordongekko

Bob24 wrote: »

Yes, for me what is more open for discussion is when you take part in a DeFi liquidity pools. I.e. is it considered that you are actually forfeiting your assets to the liquidity pool in exchange for other assets in which case there could be CGT. Or that since you kind of have a guarantee that you can recover your original assets, it effectively is a deposit to the pool which is attracting income? I think this is very much open for discussion as I find it hard to identify similar transactions that individual taxpayers would make outside of DeFi.

But IMO it is pretty clear that regular rewards related to simple deposits on the likes of Celsius, BlockFi, or CDC don’t constitute asset price appreciation and are rather payments made to you by those services as profit-sharing related to them lending-out assets on your behalf. I am keeping an open mind for official of credible sources saying otherwise, as Revenue could have a strange view on this and at the end of the day their view is what matters, but I haven’t seen any to date (quite the opposite - the few legal opinions have I seen are all backing my personal understanding).

You could possibly argue that's it's schedule d case IV income but it's still subject to income tax.

namloc1980

Any thoughts on free crypto rewards? I did some quiz thing on coinbase and got about €20 in free crypto (Compound/Amp). Is that income for tax purposes or what? And what happens if, in theory, those increased in value a lot.....CGT then if I sold them but what would be the cost basis? Would it be €0?

Bob24

namloc1980 wrote: »

Any thoughts on free crypto rewards? I did some quiz thing on coinbase and got about €20 in free crypto (Compound/Amp). Is that income for tax purposes or what? And what happens if, in theory, those increased in value a lot.....CGT then if I sold them but what would be the cost basis? Would it be €0?

Just an opinion, but the way I see it is that:
- as long as it is a relatively small amount, it can be considered a gift received as part of a commercial offer (similar to an Irish bank giving cashback on card payments or paying a reward bonus to switch account or mortgage with them). I could be mistaken, but my understanding is that no income tax is due on this type of commercial offer (nor any other tax).
- however, even though it is gifted to you, this is an asset you are acquiring, and your acquisition value for CGT purposes is the fair market value at the time you received it. Whenever you dispose of the asset, the usual CGT rules apply based on that acquisition value and your disposal value, and CGT is due if there is capital appreciation. If you are selling it immediately after receiving it, there is no CGT due, as the acquisition and disposal values are the same and the 2 transactions can be matched (even if you have older reserves of the same crypto, as the disposal transaction occurs within 4 weeks of the acquisition).


For reference, what I described above is the exact way Koinly are treating cashback on Crypto.com and Binance cards on their tax reports.

ZeroThreat

Mellor wrote: »

I understand that you’d suspect that. But in this case I am actually arguing the opposite. In that crypto should be treated as other securities are.
Additional tokens issued to token holder who have staked are by their nature more in line with bonus issues.
But this depends on the mechanics of the issue I guess

TBH From what they've previously said here I highly doubt that poster has any experience of crypto whatsoever. It's seems simpler when just dealing in theory rather than practicalities.

Danger Fourpence

Looking for some guidance here.

Back in January I invested in a crypto that did very well, Matic. Foolishly I converted a large chunk of it to another crypto and converted some to FIAT which I cashed out to deposit to Binance. Reason being is the crypto I wanted wasn't available on the exchange I bought my Matic.

I think I'm now susceptible to paying a large tax bill on gains even though I've essentially reinvested most of these in another crypto. In order to avoid that, would I be better off investing that figure in crypto to offset these gains i.e. spend $5k on stocks/crypto to avoid paying $5k in tax?

It was my first foray into proper trading and I made a bit of a mess of it, I think.

Peregrinus

The important point to grasp here is that, when you disposed of your Matic, you realised a gain which was chargeable to tax. Whether you disposed of the Matic in return for another crypto or for fiat currency didn’t change that. And what you did with the disposal proceeds also didn’t change that. 

You’re post suggests that you think you incurred a tax liability because you took some of your disposal proceeds in cash, and then withdrew that cash and paid it to another exchange to buy a different crypto. No; you incurred a tax liability before that, when you disposed of your Matic for more than you paid for it. 

Think of different cryptos as being like different shares. If you acquire a share, and then it goes up in value, and then you dispose of it, that’s a chargeable gain. You don’t avoid tax by disposing of it, not by selling it for cash but by exchanging it for a different share using the same broker or on the same stock exchange. It’s the same with crypto.

So, is there anything you can do now to avoid paying tax? Probably not. Putting more money into crypto doesn’t generate a loss which you can set off against the gain that has already accrued. But you mention that you have acquired another unnamed crypto. If, by happy chance, that crypto has fallen in value since you acquired it, if you dispose of it before the end of the year you will generate a loss than you can set off against the gain that you have already generated.  

Danger Fourpence

https://www.boards.ie/discussion/comment/117671492#Comment_117671492

Thanks for that. I have acquired another crypto since, and it has dropped a bit in value of the last few months, but not sure if I want to get rid of it tbh as I think it will blossom at some point.

Peregrinus

https://www.boards.ie/discussion/comment/117675486#Comment_117675486

Well, if you think the long-term prospects for growth are good you could sell it now, to crystallise a loss that you can set off against the gain you have already accrued, wait four weeks, and then buy it back and wait for the rise. Of course, you'll then have a lower acquisition cost, so when you dispose again you'll have a higher gain. So what you are really doing here is deferring tax on the gain that you have already accrued, not avoiding it entirely.

massdebater

https://www.boards.ie/discussion/comment/117675486#Comment_117675486

Not sure what your new asset is but, if there's a wrapped version of it, you could swap it for that to take the tax loss. That way you won't have to wait a month to repurchase.

So BTC-->wBTC or MATIC-->wMATIC etc

dirk_dangler

https://www.reuters.com/technology/cryptopunk-nft-sells-118-million-sothebys-2021-06-10/

So I have been thinking, as we know artists get very generous TAX free allowances here in Ireland, so if you where create a NFT and some one was to buy it for 50 ETH could you claim to be a artist and avoid the 33% CGT?

You could send your crypto through a mixer or use Monero , convert to ETH in a wallet that no one knows and then buy your own NFT for crazy money and no one would know who the buyer is. It the only reason i can think of for someone to spend $11,8 million on a NFT

Peregrinus

The artists’ exemption is an exemption from income tax, not from CGT.

But . .

You pay CGT if you buy something and then later sell it for more than you paid for it. (Simplified version, but close enough). If you make something and then sell it, that doesn’t attract CGT; it attracts income tax. 

So, if I write novels or paint pictures or whatever for a living, the income I get from that would be subject to income tax, were it not for the artists’ exemption.

But . . .

If I have a bunch of crypto that has appreciated hugely in value, if I spend it buying something that is a disposal, and I’m liable to capital gains tax on the gain that I realise when I dispose of the crypto. That doesn’t change if the thing I buy is a creative work of art. It also doesn’t change if I also work as an artist, and earn money by writing novels, painting pictures or creating rinky-dink NFTs. The money I earn by selling novels, paintings and NFTs is exempt from income tax, but the gains I realise by acquiring, holding and disposing of crypto are not exempt from CGT.

RulesOfNature

Crypto to crypto tax is legitimately tyrannical. It makes no sense, and is just there to make sure you lose asset wealth. Cashing out to fiat is fine, that should be taxable, but do you honestly think I'm going to give you 33% of my portfolio simply because I clicked a few buttons? This deranged system is why I moved to a different country. I will not give my portfolio to pay for the world's most expensive hospital. Neither should you.

massdebater

https://www.boards.ie/discussion/comment/117708318#Comment_117708318

What country did you move to?

Imagine if blockchain tech was used to record all government spending, I doubt these money-pit hospitals would cost so much. The transparency would be good for a lot of charity organisations too

Peregrinus

Crypto-to-crypto exchanges are treated exactly the same as share-to-share exchanges or, for that matter, foreign fiat-to-foreign fiat exchanges. Why wouldn't they be?

I am constantly amazed at the sense of entitlement exhibited by crypto fans who are outraged — outraged, I tell you! — that crypto doesn't get special tax breaks that they take it for granted are deserved for reasons that they never bother to tell you.

RulesOfNature

https://www.boards.ie/discussion/comment/117708334#Comment_117708334

You literally just said the reason in your first sentence. Crypto should NOT be treated like traditional assets because its NOT. It is not regulated by any central banks and it does NOT need fiat as a medium to trade between different assets. It only touches fiat when you cash out and that should be the only time its taxable.

Did you even read how your post contradicted itself in 3 sentences or less?

You honestly think FF/FG should get 33% of someone’s entire portfolio if they decided to swap out between two assets UNREGULATED by the government?

People are absolutely deranged. At this point its just fetishizing people not amassing wealth. The worst part is, it benefits no one (except the cronies in power) and everyone individually would be better off if this was reformed. Except crab-in-a-buckets would rather everyone get taxed to death than change the system for the better. And hence I take my 5 million elsewhere.

Bob24

You could say the same thing about gold, fine art or whatever.

I can buy a painting off someone with gold coins and never touch fiat currency. Should that exempt the transaction from CGT? Of course not and this is no different from someone swapping BTC for ETH.

RulesOfNature

https://www.boards.ie/discussion/comment/117711026#Comment_117711026

Did you really just say that a highly regulated asset (gold) being swapped for art (another regulated asset but with many loopholes) should be the same as clicking a few buttons to swap between math equations with no central governing body, like ERC20 and BTC?

So is everyone here literally 40+ years old and have literally not a single idea of what these words even mean?

Here's an idea: I will swap you 1,000,000 rocks for 2,000 of your rocks. Nobody regulates these rocks, and they're all my property and your property. Should the government step in, make an imaginary number and say 33% of those rocks value in Euros should be mine, even though not a single one of you have made any profit?

The fact of the matter is: The Central Bank does not regulate cryptocurrency. They have no jurisdiction over it. They have authority over the fiat it cashes out to, but if I wanna swap my ETH for BTC for DOGE for SHIBE for whatever the f*ck without ever touching fiat then the government should mind its own business.

It's time to be honest here. These outdated tax laws does not benefit the individual at any level. Any denial of this is pure masochistic delusion, or shilling by a government worker.

And hence, I take my capital elsewhere.

Bob24

It is irrelevant how assets are regulated or not by the central bank (you were arguing that there should be no CGT on crypto when it is traded without going back to fiat, I gave you an exemple of trade with other asset classes whereby there is no fiat involved either and CGT is still due). Capital gains are taxed no matter what and this is the case in most countries (of course there can be exceptions or special rules for certain assets but 33% CGT is the generic rule).

It is very fine if some countries decide not to have CGT at all or to have CGT exemptions for some asset classes, and you are welcome to move there. I would also agree our CGT rate is too high and certainly this can be discussed.

But it doesn’t justify why Ireland should treat crypto differently from other asset classes.

Anyway, if people disagree with you it must be because they don’t understand crypto or because they are too old (ah the stupid old people and their useless experience ;-)).

Peregrinus

I am genuinely puzzled as to why anybody would think that the question of how gains should be taxed is in any way related to the question of how assets are regulated. This makes no sense at all to me, and reflects nothing in the real world. Income tax rates do not depend on whether or how much your trade or professsion is regulated; VAT rates do not depend on whether the good and services being sold are highly regulated, lightly regulated or wholly unregulated. Why in God's name would anybody think that capital gains tax rates should depend on whether and how much the assets being acquired and disposed of are regulated? It's bizarre.

deadduck

Apologies if this was asked already, but regarding CGT between spouses, if my wife sets up an exchange account on, say, Kraken, and I send her some crypto, anything she cashes out up to her CGT exemption of €1270 is tax free?

To be clear, we are jointly assessed for tax, and the crypto was bought with joint income, but is held by me. But from what I’ve read, what I’ve laid out above is the only way to take advantage of both our exemptions?

Peregrinus

That's right.

The transfer has to be a genuine transfer; you're not "putting the crypto in her name" for her to hold on your behalf; you are making a gift to her, which means whether she subsequently sells it or not is her decision, not yours, and if she does sell it what she does with the sale proceeds is up to her. But no doubt she will see the advantage of utilising her annual CGT exemption, just as you do.

Tr_18

Do bed and breakfasting rules apply to crypto?

And if so, how does it work?

I want to sell a portion of my crypto and aim to buy back in when/if the price drops? Can this be done within the 4 weeks?