Crypto tax situation - Read post 1 for thread banned users

This isn't really a bear market, unless you think the crypto prices that prevailed around 2021 are "normal", and crypto has been in a slump at all other times before and since.

You have to not be resident for three successive years before you cease to be ordinarily resident. So if you are resident and ordinarily resident in Ireland in 2024 then the first year in which you can be not ordinarily resident will be 2028. So if your portfolio looks great in 2025 and you head off to Portugal you'll have to wait until 2028 before you dispose of your assets — by which time, of course, your portfolio may not look great.

Sorry, my bad; I missed that detail in your post.

Yes, if you're only tax-resident in Ireland for two successive years you haven't become ordinarily resident in the first place, so you can dispose of your (non-Irish) assets in the year after the year you cease to be resident without incurring a liability to Irish CGT.

You talk about heading off in 2025. I think you should get professional advice on the exact dates you need to leave; it may be necessary for you to leave before 2025 to make this work.

If you're going to do this at all you have to go for at least a full tax year, obviously, or it won't work. Which means that a considerable time can elapse between the date you leave and the date you actually dispose of the asset. Which means that if you're confident that it will continue to appreciate in value you can sit on it for a while longer.

Crypto (like any other asset) has no memory, and there is no inherent reason to think that, just because it attained a particular value in the past, it will or is likely to attain that value in the future. The future price of crypto will be determined by future events, and not by past events.

The relevance of the past price of crypto is this: if you reckon you can reliably identify the factors that led to crypto reaching the prices it did in 1921, you can then make a judgment about whether and when those factors are likely to recur, in which case you might hope that, when that happens, crypto will reach similarly high prices.

You must file a return even if the gain is within the small gains exemption.

When your assets are liquidated to pay off your loan, that would still trigger a chargeable event for you as regards CGT if there are capital gains on them. In your example, on the 70k gain.

Yes. You're disposing of your crypto.

How would that change? Would BTC need to be made legal tender, or something else?

For example, if I purchase gbp with my euro, and then buy a car with that gbp, the taxman doesn’t care whether my gbp was worth more/less. But if I purchase BTC and buy a car with that then I have to consider cgt.

What would need to change for BTC to be considered same as the gbp example?

Normal CGT rules apply to Crypto currency so essentially, yes. It's an annual return; so it's the cumulative total of your gains/losses for a particular tax year. It's not a CGT return every time you have a CGT event. And it's self assessed system. You are the one who is supposed to know what they are doing tax wise and it's up to you to carry out the calculations, pay and CGT due at the correct time and follow up with a CGT return. You can of course, employ someone to do this for you.

For that to change, cryptocurrency would have to become, well, currency.

Most CGT regimes do not regard currency (including foreign currency) as an asset. So if you're resident in Ireland, or the UK, or the US, and you have a bank account denominated in (say) Chinese Yuan (because, e.g., you buy lots of stuff from China) that's not regarded as an asset, when you buy something using your Yuan you are not regarded as disposing of an asset, you are not chargeable to CGT/can't claim a capital loss because the CNY has risen/fallen against EUR while you were holding it.

So why doesn't the same apply if you hold an account with BTC in it? Because neither the Irish or the UK nor the US (nor, I think, pretty well any) revenue authorities regard BTC as a currency. As far as they're concerned, it's an asset.

Why? Well, you can look at this in two ways.

From the legal point of view, BTC is not issued by a Central Bank or backed by a government, and it is legal tender almost nowhere (and most cryptocurrencies are legal tender actually nowhere). And those are factors that most revenue authorities point to when asked why they don't treat it as a currency for tax purposes.

From the economic point of view, BTC and other cryptos don't function as a currency. As far as the economists are concerned, currencies act as (1) a medium of exchange (2) a store of value and (3) a unit of account. While you can use crypto to make purchases or settle debts, the amount actually so used is a negligible proportion of the whole amount in issue, and most people who hold crypto never use it for that purpose. (Gold is far more often used to make purchases and settle debts, and gold is not a currency.) Crypto is a lousy store of value — it would need much more stable price characteristics to function as a store of value — and pretty much nobody uses it as a unit of account. So, basically, the economic function that crypto actually serves would have to change radically before you could mount any kind of persuasive argument that crypto is really a bunch of currencies, and should have the tax treatment appropriate to that.

Oh, God — brainfart on my part. You're quite right, of course.

I'll blame it on too may pre-Christmas drinks.

Pay the CGT before December 15th and file a form CG1 by October 31st 2025.

Same as any other assets disposed where CGT events occur. Just make sure you've got the funds held back to pay any CGT liability. And don't forget to follow up with the CG1 return next year.

Very interesting. I was just reading up on Ireland's tax treaty with Portugal only a few days ago.

I'm no lawyer and I did skim read a lot of it and might have missed something, but the two things that most struck me was there appears to be no provision for enforcement, so your lad in Portugal is going to have to be feeling very generous for that sum to be paid.

The other thing was that the treaty seems to give no recognition to Ireland's crazy 3 year claim to CGT on asset disposal nonsense, which I have always thought was unenforceable hopium.

From Article 13

EU countries can and do enforce each other's tax debts, but I would say you're correct in saying that it's difficult for them to enforce in cases where the individual has no assets like property in Portugal or a salary (maybe they could seize the crypto itself, but anyone moving due to crypto is surely capable of avoiding that issue). If you're going to do this, the safest bet is somewhere outside the EU, like Dubai.

Being a tax defaulter doesn't mean that you don't know the law, or that you set out to break it.

Obviously I know nothing about the facts of this particular case, but one way someone who trades in crypto (or other volatile assets) might find themselves in default is something like this: I sell a holding of crypto A and invest in crypto B instead. The holding of crypto A generates a large chargeable gain and consequent tax liablity, which I have to pay next December. But, because I expect crypto B to appreciate in value, I do not immediately sell some of crypto B for cash to meet the liability and bank the cash until December; I hold on to crypto B intending to sell only when the tax liability is due. But crypto B tanks and, when the tax liability is due, I don't have the funds to meet it. So I become a tax defaulter.

In fact, it doesn't even have to be that the tax liability was generated by dealing in crypto. All the really matter in this story is that someone has liabilities that they will need to meet at some point in the future, and they rely on a holding of a volatile asset to enable them to meet that liability when it falls due. Their assets don't match their liabilities, and that generates a risk. If the risk goes well — if the volatile assets appreciate in value before the liability has to be met — they can make a lot of money but if it goes badly — if the volatile assets depreciate — then, depending on the scale of their liablities, they could face not only tax default but significant loss of wealth, insolvency, bankruptcy.

That's an explainable situations were somebody unintendedly defaults. And I don't know the specifics at all either, but the fact he is in Portugal, seems to suggest an effort to avoid tax on the crypto.

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Yes that's the one