Capital Gains tax-Crypto?

Mickey Mania

Just wondering, if you do crypto to crypto trades and are liable to pay tax, let's say someone sold AVAX into Polkadot and made a profit. Is it possible to sell a portion of that Polkadot off just to pay for tax or is that in itself a taxable event?

Peregrinus

Mickey Mania wrote: »

Just wondering, if you do crypto to crypto trades and are liable to pay tax, let's say someone sold AVAX into Polkadot and made a profit. Is it possible to sell a portion of that Polkadot off just to pay for tax or is that in itself a taxable event?

In principle it's a taxable event. But of course there's only a tax liability if and to the extent that the Polkadot you sell has risen in value since you acquired it.

You can, if you wish, avoid the problem by not buying the Polkadot in the first place - i.e. when you sell the AVAX calculate your gain, calculate your CGT liablity on that gain and then sell the appropriate part of your AVAX not for Polkadot but for actual cash money, which you then set aside until tax time. Saves you commission on buying and selling the Polkadot, and saves you the risk that the Polkadot will appreciate while you hold it, thus triggering a further tax liability when you sell the Polkadot.

Of course, you might be lucky. Your Polkadot holding might plummet in value, which would not only avoid any CGT liablity on sale at tax time, but might even generate a useful loss which could be used to reduce your tax liability on the earlier transaction.

Mickey Mania

Peregrinus wrote: »

In principle it's a taxable event. But of course there's only a tax liability if and to the extent that the Polkadot you sell has risen in value since you acquired it.

You can, if you wish, avoid the problem by not buying the Polkadot in the first place - i.e. when you sell the AVAX calculate your gain, calculate your CGT liablity on that gain and then sell the appropriate part of your AVAX not for Polkadot but for actual cash money, which you then set aside until tax time. Saves you commission on buying and selling the Polkadot, and saves you the risk that the Polkadot will appreciate while you hold it, thus triggering a further tax liability when you sell the Polkadot.

Of course, you might be lucky. Your Polkadot holding might plummet in value, which would not only avoid any CGT liablity on sale at tax time, but might even generate a useful loss which could be used to reduce your tax liability on the earlier transaction.

So, if Polkadot went up 3x in value and one sold a smaller portion of it to pay for tax on the previous trade, that would then be a taxable event?

In relation to the second point, is the tax not owed on the previous trade? So if Polkadot plummeted in value, wouldn't you have to sell more Polkadot to account for the gains made on the previous trade? There was a tax assistant in the U.S. who sold his Bitcoin into Alts, made gains, but his portfolio plummeted, he still owed the IRS 50k on the original trade.

Peregrinus

Mickey Mania wrote: »

So, if Polkadot went up 3x in value and one sold a smaller portion of it to pay for tax on the previous trade, that would then be a taxable event?

Yes.

Mickey Mania wrote: »

In relation to the second point, is the tax not owed on the previous trade? So if Polkadot plummeted in value, wouldn't you have to sell more Polkadot to account for the gains made on the previous trade? There was a tax assistant in the U.S. who sold his Bitcoin into Alts, made gains, but his portfolio plummeted, he still owed the IRS 50k on the original trade.

Well, let's do a little worked example (in which I will completely ignore transaction costs and the small gains exemption, to keep things simple).

I buy €100 worth of Bitcoin. Years later I dispose of it, at a time when it's worth €5,000. My gain, obviously, is €4,900. CGT on that at 33% would be €1,617.

When I dispose of my Bitcoin, I do so by swapping it for Alts worth, obviously, €5,000. By the end of the year, when the time comes to pay my tax, let's say this has fallen to €3,000.

I now have a choice:

I can do nothing. I have only one chargeable transaction to report and it will result in a tax bill, as already calculated of €1,617. I'll have to find the cash to pay this somewhere.

Or, before the end of the year I can dispose of my Alts for another crypto, or for cash, or for anything, really. It doesn't matter. The disposal of the Alts is a second chargeable transaction, resulting in a loss of €(5,000 - 3,000 2,000.

So now my CGT return for the year will show two transactions occurring in the year, one resulting a gain of €4,900 and the other resulting in a loss of €2,000. I can set the loss off against the gain. Net gains for the year are €(4,900 - 2,000 €2,900. CGT on that at 33% is €957. So I've saved €660 in tax. But note that I can only do this because I disposed of the Alts; until I dispose of the Alts, I don't have either a loss or a gain, regardless of what the price may be doing.

Plus, I no longer hold any crypto. What I have (assuming I sold the Alts for cash) is €3,000 that I got from selling the Alts, less €957 that I have paid to the Revenue, leaving me with €2,047 - still a lot more than the €100 I started off with all those years ago, but a lot less than I'd have if I'd never bought the bloody Alts in the first place. If I haven't been scared off my experience with the Alts I can, of course, use my €2,047 to buy more crypto - Alts, or something else.

Rob2D

I'm going to figure out my tax one of these days but just had a look there and apparently you've to register first. Then that led me to another thing where you need a GovID or something. So more registration.

Just a heads up to those who were going to leave it to the last minute. You might want to get this all lined up first.

Connavar

Rob2D wrote: »

I'm going to figure out my tax one of these days but just had a look there and apparently you've to register first. Then that led me to another thing where you need a GovID or something. So more registration.

Just a heads up to those who were going to leave it to the last minute. You might want to get this all lined up first.

The revenue site is a mess. Pretty unclear as to what is needed.
Need to get a tax registraiton number in order to register for CGT by the looks of it but to get one you seem to need to register as a sole trader which feels wrong to me.
Am I missing something here?

Bob24

Rob2D wrote: »

I'm going to figure out my tax one of these days but just had a look there and apparently you've to register first. Then that led me to another thing where you need a GovID or something. So more registration.

Just a heads up to those who were going to leave it to the last minute. You might want to get this all lined up first.

You mean for CGT registration?

relax carry on

Connavar wrote: »

The revenue site is a mess. Pretty unclear as to what is needed.
Need to get a tax registraiton number in order to register for CGT by the looks of it but to get one you seem to need to register as a sole trader which feels wrong to me.
Am I missing something here?

The link below from the Revenue website tells you what to do as a PAYE employee with CGT. Put simply register for the CGT taxhead. Pay the CGT due in the year the CGT is due. File a pdf CG1 the following year by 31st October.

https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/when-and-how-do-you-pay-and-file-cgt.aspx

Connavar

relax carry on wrote: »

The link below from the Revenue website tells you what to do as a PAYE employee with CGT. Put simply register for the CGT taxhead. Pay the CGT due in the year the CGT is due. File a pdf CG1 the following year by 31st October.

https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/when-and-how-do-you-pay-and-file-cgt.aspx

Saw that page alright. It's the register for CGT taxhead part that is confusing me a bit.
Will have a proper look later as was doing it a bit on the side

Irish_rat

quinneerr wrote: »

Here is what you do, most here have put $1000 into crypto, made it to $5000 and are worried about the tax man.
The reality is your life in Ireland will continue to be one of the 9 to 5 grind, so forget about your $1000 initial investment, its gone.
Your goal now is to keep rolling over profits, trade after trade, increase your $1000 to $5000 than onwards to $10,000, let that baby ride, soon be at $20,000, keep at it and you will get to $50,000 , now your sucking diesel, starting to make money, just a decent trade away form $100,000, you can do it, as has been proven by many, once you hit $100,000, you enter six figure hell, its a lot of money, but not enough to change your life.
After trading up to $100,000, you will have run up a ridiculous CGT bill on every trade, you would be lucky to cash out $25,000, to hell with that, after all the work you put in, all the risk you took, you now accept as fact your road is now coming to a fork, Irish prison for tax evasion or the GOOD life in Portugal.
You are now within touching distance of a life of freedom, an actual life where you will be living, not working in a job you have zero interest in keep trading.
$100,0000 to $200,000 to $400,000 to $800,000 to $1,600,000, you are only FOUR trades away from making it, this opportunity that we have been presented with Crypto is a once in a lifetime , don't squander it by cashing out you initial $1000 and then dribs and drabs of your trading profits, only to be raging as you had over 33%+ to FF/FG ,the bastards that have you working like a dog and getting nowhere in life.
Keep trading, dream the dream, you don't want to be 66 and retiring (probably 70 at the rate we are going) and getting a poxy watch from your employer for 40 years of loyal service, now on a miserable pension in a dog box apartment and all the time wondering what life could have been like if i only kept going with crypto back in 2021.
All or nothing, the good life or working till 70 and always wondering what if..........

Some people don't need to have a million bucks but the 4% rule works very well. I think I would consider my 9-5 if the house is paid off and I've 500k. Plenty of good staking platforms to live off probably a fifth of that even

Greenlights16

don't you have to be in portugal to spend the money though? I.E. you would need to move there, it can't be as simple as getting all of your fortune deposited into a Portuguese bank account, withdraw it in lumps every so often by flying over and back from Ireland?

HGVRHKYY

Greenlights16 wrote: »

don't you have to be in portugal to spend the money though? I.E. you would need to move there, it can't be as simple as getting all of your fortune deposited into a Portuguese bank account, withdraw it in lumps every so often by flying over and back from Ireland?

You need to live and be tax resident in Portugal for more than 3 years

quinneerr

HGVRHKYY wrote: »

You need to live and be tax resident in Portugal for more than 3 years

From what i have read online to avoid Tax in Ireland, not in Portugal.
Move to Portugal tomorrow, open Bank account, deposit money from Crypto account and live the good life, Portugal Tax man is not interested.

SkyRevNet

quinneerr wrote: »

From what i have read online to avoid Tax in Ireland, not in Portugal.
Move to Portugal tomorrow, open Bank account, deposit money from Crypto account and live the good life, Portugal Tax man is not interested.

Portugese tax man is not interested. But Irish Revenue will be.

You may ask, how will they find out? Well they might, they might not, that's the risk you take. If you're confident they would never find out then there would be no need to leave Ireland in the first place.

If they do find out, and you're in Portugal, I would be surprised if they couldn't pursue you in another EU state.

quinneerr

Do posters believe the Irish Tax man keeps eyes on everyone who leaves Ireland to move abroad?
We are a people that have a lot of emigration, i cant see it as something that the Tax man does.

SkyRevNet

quinneerr wrote: »

Do posters believe the Irish Tax man keeps eyes on everyone who leaves Ireland to move abroad?
We are a people that have a lot of emigration, i cant see it as something that the Tax man does.

They do. You're probably less likely to fall foul of them if you're registered abroad, especially after a couple of years, but ultimately, you can still pop up on their radar and be pursued.

relax carry on

quinneerr wrote: »

Do posters believe the Irish Tax man keeps eyes on everyone who leaves Ireland to move abroad?
We are a people that have a lot of emigration, i cant see it as something that the Tax man does.

I'm not going to bother finding the links about automatic exchange of information globally as it's been posted before but there is no taxman physically keeping tabs on you. What there is, are data analytics programs reviewing data received from around the globe under the various exchange agreements. Take your chances but do so in the full knowledge that it may eventually catch up with you.

Bob24

relax carry on wrote: »

Take your chances but do so in the full knowledge that it may eventually catch up with you.

And if people get caught later on, face your responsibilities and don't come crying that you don't have the cash to pay for tax arrears and penalties and that you are the victim in this situation. It is a bit like those Irish people who settle in the US illegally and because they don't get caught immediately assume everything is going to be OK forever. It might feel good in the short term but when past responsibilities catch-up with you it can hit hard.

HGVRHKYY

quinneerr wrote: »

Do posters believe the Irish Tax man keeps eyes on everyone who leaves Ireland to move abroad?
We are a people that have a lot of emigration, i cant see it as something that the Tax man does.

Outside the EU, you're probably grand, but honestly it's absolutely possible for EU countries to communicate and cooperate with each other. If you moved home with new wealth in less than 3 years and got audited, revenue would likely be able to find info from Portugal. Better off just doing it all above board. If you're relocating for this anyway you'd have a good tax advisor to help, and you'd likely have enough money after then to move somewhere like Switzerland or Malta

The 3 year rule is yet another harsh, disgraceful term in place to punish us for trying to better our financial situations though

SkyRevNet

HGVRHKYY wrote: »

The 3 year rule is yet another harsh, disgraceful term in place to punish us for trying to better our financial situations though

No, it's designed to stop tax evaders, who know they are due large gains, from moving to low/non tax countries and then "realising" those gains.

Lorne Malvo

You transfer your coins to a cold wallet; you then relocate to a tax haven, such as Portugal, set up residency and take out your coins there and convert to fiat...all above board or am I missing something?

relax carry on

Lorne Malvo wrote: »

You transfer your coins to a cold wallet; you then relocate to a tax haven, such as Portugal, set up residency and take out your coins there and convert to fiat...all above board or am I missing something?

Yes. The last few pages.

Bob24

SkyRevNet wrote: »

No, it's designed to stop tax evaders, who know they are due large gains, from moving to low/non tax countries and then "realising" those gains.

Actually one question I would have is: is the Irish CGT liability lifted/reduced if the person also has a CGT liability in their new tax residence related to the same asset disposal?

I do not know the answer but it would influence whether I agree with the above. If Ireland is double-taxing people who have already paid a tax in their new country of tax residence, it is shameless confiscation with no moral justification. If it only applies to people who have moved to a country with no equivalent taxation, then I would agree it serves a purpose to prevent tax tourism (although it still is arguable whether it is justified to tax someone who isn't living here anymore and not entitled for public services and benefits).

HGVRHKYY

SkyRevNet wrote: »

No, it's designed to stop tax evaders, who know they are due large gains, from moving to low/non tax countries and then "realising" those gains.

And we all know what would at least improve things to reduce the incentive for such people: having a fair and reasonable CGT rate and more convenient setup for things like index funds/ETFs

SkyRevNet

Bob24 wrote: »

Actually one question I would have is: is the Irish CGT liability lifted/reduced if the person also has a CGT liability in their new tax residence related to the same asset disposal?

I do not know the answer but it would influence whether I agree with the above. If Ireland is double-taxing people who have already paid a tax in their new country of tax residence, it is shameless confiscation with no moral justification. If it only applies to people who have moved to a country with no equivalent taxation, then I would agree it serves a purpose to prevent tax tourism (although it still is arguable whether it is justified to tax someone who isn't living here anymore and not entitled for public services and benefits).

I know for other tax heads (e.g. Income Tax), you get a full credit for any tax paid to countries with which Ireland has a double tax agreement. So you effectively only pay the Revenue the difference between Irish Tax liabiltiy and the Foreign Tax liability.

Where tax is paid to a non-DTA country, it basically operates as a "deductible expense" that reduces your "gain/income".

I assume the same treatment applies for CGT

SkyRevNet

HGVRHKYY wrote: »

And we all know what would at least improve things to reduce the incentive for such people: having a fair and reasonable CGT rate and more convenient setup for things like index funds/ETFs

What's fair and reasonable is subjective.

I would rather see the government incentivise investment in assets that provide tangible benefits to the local/national economy, not necessarily incentivising investment in share/asset speculation.

Anyway, combined Income tax rates are in and around 30% for most people, so it's no less "fair and reasonable" than that. (In fact, it's even higher if you take Employer PRSI into account).

HGVRHKYY

SkyRevNet wrote: »

What's fair and reasonable is subjective.

I would rather see the government incentivise investment in assets that provide tangible benefits to the local/national economy, not necessarily incentivising investment in share/asset speculation.

Anyway, combined Income tax rates are in and around 30% for most people, so it's no less "fair and reasonable" than that. (In fact, it's even higher if you take Employer PRSI into account).

Yes, so you're already paying high taxes on your income, which is fair enough as it's the largest tax bracket, and you are guaranteed your salary if working. But then, against all odds in this extortionate country, manage to save some disposable cash, which is also taxed for simply being in your bank account, and decide you really need to invest it if you stand any chance to actually get yourself some bit ahead. So you take the time and make the effort to research it all, and then you ultimately make the risk with that disposable income, which you've already been taxed on, and if you succeed, congratulations that'll be a third of your profits, thank you! Not everyone who's investing is someone who was born with a silver spoon and should have their profits gouged in the interest of income inequality. We're actively dragging down people who are definitely the type of people who would generally end up using their profits down the line to start further businesses or invest in start ups. It's a double tax on people intelligent and motivated enough to try and better their lot in life, and the same people get **** all to show for it in terms of public services, we don't even have proper universal healthcare

CGT accounts for just over 1% of the annual tax take, you'd swear it actually collected loads of taxes with how ridiculously punishing it is and the pathetic "income inequality" reasoning thrown about by some people

Bob24

SkyRevNet wrote: »

I know for other tax heads (e.g. Income Tax), you get a full credit for any tax paid to countries with which Ireland has a double tax agreement. So you effectively only pay the Revenue the difference between Irish Tax liabiltiy and the Foreign Tax liability.

Where tax is paid to a non-DTA country, it basically operates as a "deductible expense" that reduces your "gain/income".

I assume the same treatment applies for CGT

I agree that double-taxing wouldn’t be reasonable in principle, but I wouldn’t assume anything when it comes to waiving tax liabilities. I only believe it when I see it black on white.

The reason I am asking actually is that I have looked at some tax treaties before and didn’t see CGT mentioned.

For exemple see here the one with France: https://www.revenue.ie/en/tax-professionals/documents/double-taxation-treaties/f/france.pdf

If you move to France and become a tax resident there, you will become liable for the French CGT regime immediately. Meaning for exemple 30% CGT if you sell some company shares you had purchased while living in Ireland (very close to the Irish rate, no one would move there for tax evasion purpose).

However based on Irish law you are still liable for 33% Irish CGT *as well* for the 3 years after leaving Ireland and I don’t see anything in the tax treaty saying this is waived. I.e. a total of 63% CGT (30% to the French taxman and 33% to the Irish one).

If you have written documentation that this is incorrect I would be reassured and agree the 3 years rule might be to avoid tax tourism. But otherwise if there is no documented exception to the written rule of 3 years of continuous liability, in my view it would just be shameless confiscation with no justification.

Lorne Malvo

relax carry on wrote: »

Yes. The last few pages.

could you? thanks

SkyRevNet

Bob24 wrote: »

I agree that double-taxing wouldn’t be reasonable in principle, but I wouldn’t assume anything when it comes to waiving tax liabilities. I only believe it when I see it black on white.

The reason I am asking actually is that I have looked at some tax treaties before and didn’t see CGT mentioned.

For exemple see here the one with France: https://www.revenue.ie/en/tax-professionals/documents/double-taxation-treaties/f/france.pdf

If you move to France and become a tax resident there, you will become liable for the French CGT regime immediately. Meaning for exemple 30% CGT if you sell some company shares you had purchased while living in Ireland (very close to the Irish rate, no one would move there for tax evasion purpose).

However based on Irish law you are still liable for 33% Irish CGT *as well* for the 3 years after leaving Ireland and I don’t see anything in the tax treaty saying this is waived. I.e. a total of 63% CGT (30% to the French taxman and 33% to the Irish one).

If you have written documentation that this is incorrect I would be reassured and agree the 3 years rule might be to avoid tax tourism. But otherwise if there is no documented exception to the written rule of 3 years of continuous liability, in my view it would just be shameless confiscation with no justification.

I just had a quick look of the relevent section of the CGT tax act. Looks like it effectively states that Double Tax Rules of the Income Tax also apply to CGT. See S38 of CGT Act.

Mellor

Bob24 wrote: »

I agree that double-taxing wouldn’t be reasonable in principle, but I wouldn’t assume anything when it comes to waiving tax liabilities. I only believe it when I see it black on white.

I think it depends on the DTA in question..

For example, the Australian one says;

The Government of Ireland and the Government of Australia, desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains,

However based on Irish law you are still liable for 33% Irish CGT *as well* for the 3 years after leaving Ireland and I don’t see anything in the tax treaty saying this is waived. I.e. a total of 63% CGT (30% to the French taxman and 33% to the Irish one).

It's likely that that could happen in come locations. But the taxes would compound, rather than be added together.
Ie the tax in the first, would reduce your gain for tax purposed in the second.

As you lose a 1/3 to Ireland, the 30% in France only applies to the 2/3. This makes it an effective 20% (2/3 of 30%). 53% is still horrendous, bit not a bad as 63%.

You just couldn't realise and gains during those years only than exempt amounts.

fbradyirl

Does Koinly give a good enough output
to enable all Revenue forms to be filled easily at the end of the year ? I obviously cannot determine that without paying the fee.

Probes

Chris_5339762 wrote: »

How much detail do they want? Thats also an interesting though. Like, would they be happy if you declared the amount based on some Excel calcs done purely off say, the Kraken ledger?

Just out of interest, I don’t think this got an answer but its exactly what I’m doing. I have a spreadsheet which takes outputs from Gemini and etoro. I’ve worked on it to the best of my ability but honestly the complexity of is quite astounding, I think it’s possible that it has quite a few errors in there even though I’ve tried my best to make it workable. I suspect that even the taxman wouldn’t be able to calculate the tax 100% accurately though as in particular etoro has thousands of transactions in it, hundreds in a day at some points. I haven’t cracked the vagaries of etfs and how to apply the tax from them yet either. I’m going to keep working on this as best I can, likely that it’s not going to be needed this year anyway, but does revenue expect this kind of detail or do they simply expect everyone to use an accountant?

Peregrinus

For something like crypto, I would think that as long as you apply a reasonable valuation basis to give euro values for your acquisition costs and disposal proceeds, and so long as you apply that basis consistently to your acquisitions and disposals alike, I don't think you'll get any grief from the Revenue.

This issue already arises for people who deal in foreign currencies, the prices of which fluctuate moment by moment throughout the day. If you're reporting a transaction, one side or other of which involves euro, of course assigning a euro value is straightforward. But if you use one foreign currency to buy another, do you have to value that according to the euro exchange rate that applied at the instant the transaction was effected? No, you don't. You can, e.g., value those at the closing price for the day, which is easily ascertainable.

LillySV

KilOit wrote: »

They can barely use emails, still in fax age, you think they have the ability to go through 1000's of transactions from defi to cen exchanges for 1 user?
I work in a government department, they are not even remotely capable of doing what you suggest here
I still declare myself but unless you are pumping 1000's into your bank account you are not on their radar

U must work in the Hse! Haha

revenues systems and staff are well very capable at doing their job, it’s the one dept that the govt places a lot of focus on ...

Probes

Peregrinus wrote: »

For something like crypto, I would think that as long as you apply a reasonable valuation basis to give euro values for your acquisition costs and disposal proceeds, and so long as you apply that basis consistently to your acquisitions and disposals alike, I don't think you'll get any grief from the Revenue.

This issue already arises for people who deal in foreign currencies, the prices of which fluctuate moment by moment throughout the day. If you're reporting a transaction, one side or other of which involves euro, of course assigning a euro value is straightforward. But if you use one foreign currency to buy another, do you have to value that according to the euro exchange rate that applied at the instant the transaction was effected? No, you don't. You can, e.g., value those at the closing price for the day, which is easily ascertainable.

That’s interesting, I calculate the euro exchange at the buy and sell point of each asset using the central banks daily exchange rate. It doesn’t take into account the actual initial deposit into USD though, I’m at a loss how I would do that so I’ve just left that bit out!

nathan99

Hi Guys

Just have a question.... im sorry if its been asked before.

If i sell my crypto at a loss , and then buy back in , can i use that loss to write off against future gains ?

is there a period i have to wait to buy back in?

HGVRHKYY

nathan99 wrote: »

Hi Guys

Just have a question.... im sorry if its been asked before.

If i sell my crypto at a loss , and then buy back in , can i use that loss to write off against future gains ?

is there a period i have to wait to buy back in?

Yep, 4 weeks apparently

Probes

I think the 4 weeks rule applies to shares that have been held for less than 4 weeks? They don’t count against losses. Unless there is another rule I’ve missed.

https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/selling-or-disposing-of-shares.aspx

Mellor

Probes wrote: »

I think the 4 weeks rule applies to shares that have been held for less than 4 weeks? They don’t count against losses. Unless there is another rule I’ve missed.

https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/selling-or-disposing-of-shares.aspx

Yeah this came up last week.
The one on revenue only described transactions in one way. The does the paragraph in the actual law.
But further down it’s described in the opposite way.

Also applies if a husband and wife buying/sell within 4 weeks.

Probes

Mellor wrote: »

Yeah this came up last week.
The one on revenue only described transactions in one way. The does the paragraph in the actual law.
But further down it’s described in the opposite way.

Also applies if a husband and wife buying/sell within 4 weeks.

To me it reads that if you buy and sell a share within a 4 week period then you can't use the loss to offset against your taxes, unless you buy back the same shares within another 4 week period after selling.

Mellor

Probes wrote: »

To me it reads that if you buy and sell a share within a 4 week period then you can't use the loss to offset against your taxes, unless you buy back the same shares within another 4 week period after selling.

That is what that link to revenue says.
But it’s not the full extent of the law.

Bob24

Mellor wrote: »

I think it depends on the DTA in question..

For example, the Australian one says;

Yes it seems to be inconsistent. But it seems to indicate that the goal of the 3 years rule isn't to prevent tax optimisation (or at least not only). I picked France because it isn't exactly a tax heaven (more like a tax hell). So no-one goes there for the purpose of avoiding Irish tax and there is no good reason to double-tax anyone moving there.

Mellor wrote: »

It's likely that that could happen in come locations. But the taxes would compound, rather than be added together.
Ie the tax in the first, would reduce your gain for tax purposed in the second.

As you lose a 1/3 to Ireland, the 30% in France only applies to the 2/3. This makes it an effective 20% (2/3 of 30%). 53% is still horrendous, bit not a bad as 63%.

You just couldn't realise and gains during those years only than exempt amounts.

This is a big assumption to make IMO and probably would need to be tested in French and Irish courts.

From the perspective of the taxpayer involved, of course I understand where you are coming from. But if you do as you suggest and only file gains in France after deducing the Irish tax, I doubt French tax authorities will agree to coming second and thus not getting their full 30% of the actual gains (especially if you are a tax resident in France - it is not their problem that another country you are not living in still wants to tax you, why would they accept to come after that country?).

And if you do it the other way around Revenue might not like not getting their full 33% either.

But in any case even if you could do as you suggest, it would still be shameless double-taxation and nothing to do with preventing tax optimisation.

Peregrinus

Countries don't primarily structure their tax laws on matters like residents departing with a view to preventing tax optimisation, but simply with a view to collecting the tax that (they feel) is their due. If they would levy tax on someone who has recently left for the British Virgin Island, then they will levy tax on someone who has recently left for France. The issue is not the moral or political views that might be formed about the country you have moved to; it's your connection with the country you have moved from. And that is the same in both cases.

When it comes to CGT, the feeling is that where the gain has accrued while you were resident in Ireland, the fact that you leave the country just before realising the gain doesn't mean that Ireland shouldn't seek to tax it. Hence the ordinary residence rule.

On the double tax agreement thing, older DTAs tend not to cover capital gains tax because, until relatively recently, many countries did not have a distinct capital gains tax; they taxed gains as income or they didn't tax them at all. Newer tax treaties do cover CGT. The Ireland/France DTA dates from 1968, when we didn't have a capital gains tax. Ireland has an active programme for updating its DTAs but of course this requires co-operation from the other countries involved. It's possible that this isn't a priority for France.

Where you don't have a double taxation agreement, or where you have one but it doesn't cover CGT, the Irish approach is to treat any tax levied on the disposal in your country of residence as part of the costs of disposal. So, you're living in France. You sell your shares for (say) €10,000, of which (say) €4,000 represents a gain. You pay a 1% commission (€100) to the broker; that's deductible, so it reduced your gain to €3,900. You pay 30% tax (€1,170) in France on that; that's also deductible for Irish CGT purposes, so it brings your chargeable gain down to €2,730, and Irish CGT is calculated on that amount.

The legal authority for this is Taxes Consolidation Act 19987 s. 282(4):

. . . the tax chargeable under the law of any country outside the State on the disposal of an asset which is borne by the person making the disposal shall be allowable as a deduction in the computation . . . of the gain accruing on the disposal.

Mellor

Bob24 wrote: »

Yes it seems to be inconsistent. But it seems to indicate that the goal of the 3 years rule isn't to prevent tax optimisation (or at least not only). I picked France because it isn't exactly a tax heaven (more like a tax hell). So no-one goes there for the purpose of avoiding Irish tax and there is no good reason to double-tax anyone moving there.

As pointed out above, the DTA were all written at various times, laws they covered changed in the interim. Plus the intention of all DTA is not necessarily the same anyway.

This is a big assumption to make IMO and probably would need to be tested in French and Irish courts.

I don't think it does require testing in court. It's cover under general tax laws.
Whether the 33% or the 30% is applied first, the outcome the the same c.53%.

The Irish tax is charge on the gains. If the process of trading in shares involves a 30% tax. Then that is a cost involved for the individual and clearly impacts any gain.

But if you do as you suggest and only file gains in France after deducing the Irish tax, I doubt French tax authorities will agree to coming second and thus not getting their full 30% of the actual gains (especially if you are a tax resident in France - it is not their problem that another country you are not living in still wants to tax you, why would they accept to come after that country?).

And if you do it the other way around Revenue might not like not getting their full 33% either.

Who comes first is really a matter for the relevant revenues departments to sort out. If you are taxed at source in one, they'll likely get in first, as with . Doesn't necessarily have to full rate in either.
Income tax is similar. If you are taxed at source in one location, it's offset in the other. First in best dressed I guess.

As much as they will both want to be in first.
France have to recognise that the assets were likely bought before the person became a resident. And the majority of the appreciation of the asset may have occurred by the time you became a tax resident.
Similarly, Ireland have to recognise that you are no longer a resident of Ireland.

In practical terms, you'd really want to be stuck to subject yourself to a double taxation where it occurs.

Peregrinus

As pointed out, the Irish legislation allows for the tax levied by the other country to be taken as a deduction in the computation of the chargeable gain. So I think that's a concession that the foreign tax might be the first levied.

I think it's generally accepted, as between revenue authorities in different countries, that levying tax on residents is standard, and is reasonable, and therefore the country that is seeking to tax someone who is non-resident will accept the fact of the tax being imposed by the country of residence. That's why the Irish legislation is drafted the way it is. I would expect, though I don't know for sure, that if the boot were on the other foot — i.e. if France were seeking to levy CGT on a sale of shares or securities by someone resident in Ireland but with a connection to France — France would grant a deduction for the Irish CGT paid.

A similar approach is taken to taxes on assets located in another country. If an Irish resident derives income or gains from, say, letting or selling land in Umbrellastan, it's standard and reasonable for Umbrellastan to tax income/gains derived from that asset, and so any Umbrellastani tax paid by the Irish resident will be deductible in calculating his liability to Irish tax.

Bob24

Mellor wrote: »

I don't think it does require testing in court. It's cover under general tax laws.
Whether the 33% or the 30% is applied first, the outcome the the same c.53%.

Looking at the thread, yourself and Peregrinus disagree on the order in which the taxes should be applied … so there isn’t consensus here (although it seems like Irish legislation points towards Peregrinus’ view).

The order might not matter to you as a taxpayer but it does matter to tax authorities as it impacts the amount they will be receiving. So I don’t believe this is something they would take lightly.

But anyway those are technicalities and I think we agree that at the end of the day this is double taxation no matter how you slice it. And there would be nothing preventing Ireland from amanding the 3 years years rule if CGT is due in the new country of tax residence, International tax treaties are one way, but quite simply it could also be in the legislation - I have came across tax legislation before which specify different tax treatments depending on whether funds are received in a tax heaven (for exemple some countries have legislation to apply higher withholding tax on capital income from some of their domestic assets, if the recipient of that income is resident in a tax heaven).

Mellor wrote: »

In practical terms, you'd really want to be stuck to subject yourself to a double taxation where it occurs.

3 years is a very long time to wait if you have assets/investments which you don’t think are good ones anymore and should be liquidated. In practise I think most people with a diversified stocks (or even crypto) portfolio will find themselves in that position during any 3 years period.

Mellor

Bob24 wrote: »

Looking at the thread, yourself and Peregrinus disagree on the order in which the taxes should be applied

I think you need to re-read what I said. As I gave no indication on which order it should be applied. I said it depends on whether its taxed the source or not. And point out that the order doesn't matter to the total*.

Eg I'm taxed on global income. If If I get taxed on foreign income, It's offset domestically, if I'm not taxed on it, I pay tax domestically. The trigger is whether I'm taxed is withheld or not.
Same would apply in this situation, with the additional layer of looping back in a ordinarily resident tax.


*Assuming that the French law is similarly structured. If not, the order may make a difference.

The order might not matter to you as a taxpayer but it does matter to tax authorities as it impacts the amount they will be receiving. So I don’t believe this is something they would take lightly.

That's really their issue to manage, it's not up to the individual. The Irish law allows for he offsetting of the foreign tax when it's paid. If an equivalent French law exists, then either law gives no indication on the order.
Ultimately it likely makes little difference to them either. If they instance on being paid first in one instance, it possibly creates a situation where they are paid second under their logic.

3 years is a very long time to wait if you have assets/investments which you don’t think are good ones anymore and should be liquidated. In practise I think most people with a diversified stocks (or even crypto) portfolio will find themselves in that position during any 3 years period.

It is a long time. If somebody was putting themselves in that situation. They would either need to ensure there is no double taxation. Or they can realise their gains prior to the second residency taking effect.

Well there is a third option that I won't encourage ormention.

Peregrinus

Bob24 wrote: »

But anyway those are technicalities and I think we agree that at the end of the day this is double taxation no matter how you slice it. And there would be nothing preventing Ireland from amanding the 3 years years rule if CGT is due in the new country of tax residence, International tax treaties are one way, but quite simply it could also be in the legislation - I have came across tax legislation before which specify different tax treatments depending on whether funds are received in a tax heaven (for exemple some countries have legislation to apply higher withholding tax on capital income from some of their domestic assets, if the recipient of that income is resident in a tax heaven).

It is double taxation, and Ireland could unilaterally change its laws so as to allow a full credit for the foreign tax paid. That would avoid the double taxation problem. And there would be no need to make any distinction between tax havens and non-tax havens; under that rule, if you have become resident in a country which charges little or no tax, you would get little or no credit against your Irish tax.

The thing is, France could also unilaterally change its laws so as to allow a full credit for foreign tax, and that would be just as effective to avoid double taxation. Why would we expect Ireland, rather than France, to take this step?

The truth is that neither country will move unilaterally on this. Once they do, they (a) lose tax revenue, and (b) remove any incentive for the other country to make any changes. They give away a bargaining chip which could otherwise be used to negotiate reciprocal changes (in a double taxation agreement that would cover CGT, for example).

Ireland is in a sensitive position here, since there is less and less goodwill abroad for our our, um, somewhat aggressive policies on corporate taxation. Any proposal to renegotiate existing double taxation agreements risks being treated by the other party as an invitation to seek changes in relation to acceptance/recognition of Irish corporate tax measures. This is an issue that Ireland would strongly prefer to see addressed multilaterally and, while that is happening, the review and renewal of Ireland's network of DTAs is not likely to be strongly pressed by Ireland.

So I wouldn't expect any early changes on this particular point. Maybe consider retiring to a country other than France? Portugal for a year or so might be nice until you have disposed of your squillions of crypto, and then relocate to France!

Bob24

Mellor wrote: »

I think you need to re-read what I said. As I gave no indication on which order it should be applied. I said it depends on whether its taxed the source or not. And point out that the order doesn't matter to the total*.

As I said, the order is just a detail anyway and the real matter is double taxation, but here is where you suggested that order:

Mellor wrote: »

As you lose a 1/3 to Ireland, the 30% in France only applies to the 2/3. This makes it an effective 20% (2/3 of 30%). 53% is still horrendous, bit not a bad as 63%.