By Bit2buzz on The Capital
Although Bitcoin and alternative cryptocurrencies are designed to be used by its owner without the involvement of regulatory authorities, the concept is now subject to varying tax restrictions by local regulators. Depending on what country you hold your citizenship with, the income out of cryptocurrency will abide by the tax laws of the respective country.
Especially, Irish investors and traders who jumped into the crypto tray — when Bitcoin was on a high peak — may still find the country’s taxation policies convenient. Interestingly, there are thousands of tech-savvy people in Ireland who are adherent to invest their fiat holdings and venture into the decentralized world. And it is essential for crypto enthusiasts, traders, and investors to show their finances in order.
Following are the five crucial things Irish investors should know about crypto taxes;
Covert Crypto into Euro — As per the Revenue Commissioners (Na Coimisinéirí Ioncaim) Irish-based companies are obligated to prepare their accounts in euro or other functional currency but not entitled to do so in crypto. As such, the payment to employees has to be converted from cryptocurrencies into euro during the time of payment. This rule is meant to effectively calculate the income tax.
No Special Rules Applied — Back in mid-2018, Irish revenue service has published a manual to illuminate various questions revolves around taxation on cryptocurrency in Ireland. Per the “The Tax and Duty Manual,” cryptocurrency comes under the country’s existing taxations rules. While no special rules have been added, the regulator urged businesses to maintain a record of crypto transactions (in case if the crypto is being accepted as a payment). As such, the country’s “normal CT rules” will be applied to the profits and losses of a company’s crypto transactions.
Crypto Taxations Subjected to Capital Gain Tax (CGT) — In Ireland, the profit and losses on cryptocurrencies are subject to capital gains taxes (CGT). Since cryptocurrencies are volatile in nature, a stable exchange rate is quite difficult to follow — henceforth “a reasonable and appropriate effort must be made” to calculate the taxes on the crypto investments With that being said, if an individual is making a profit via gifting, selling or exchanging the cryptocurrency, he/she must declare it to Revenue for capital gain tax (CGT) and such gains will be taxable at a rate of 33% under Capital Gains Tax (CGT).
Profit and Loss on Crypto — An individual has to file a tax return every year if any profit shows up. Accordingly, if the profit on cryptocurrency made between January 1 and November 30, then an individual must file CGT by December 15. In contrast, if gains made between January 1 and December 31, then he/she must pay CGT by January 31st of the following year.
Given the fact that cryptocurrency is impulsive by nature, it’s natural to incur the losses. Since Ireland considers crypto gains as capital gains, the losses out of cryptocurrency will also be treated in the same way as a capital loss.
VAT for Crypto Trading and Mining — Trading in cryptocurrency will not attract VAT (Value Added Tax) in Ireland. As per Revenue, bitcoin and alternative cryptocurrency are exempted from VAT as they’re considered as the “negotiable instruments”. Besides crypto trading, crypto mining is also exempt from paying VAT. Revenue considers crypto mining as, “the reward is given to an individual who is solving the complex problem” as such, it says “mining activity doesn’t constitute an economic activity for VAT purposes”.
In a nutshell, you should consider 33% capital gains tax if you’re en-routing/ted to build your crypto portfolio. Regardless of a profit or loss, an Irish crypto enthusiast has to file a tax return every year.
5 things Irish investors should know about crypto taxes was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.
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