Crypto Gains & Losses

This is an area many of our tech sector contractors have investments in, and queries have recently become more common. Tax authorities across Europe are seeking ways to ensure they all get their cut of the profits!

No Special Treatment

The Guidance issued by Revenue attempts to clarify matters related to cryptocurrency taxation and mostly confirms that the existing regulations apply to the this sector. The document provides guidelines on the tax treatment of various transactions involving cryptocurrencies. Revenue are quite clear that the advisory recently published is to be used as a reference for tax purposes only, as it does not cover regulatory and other aspects.

Investments

If you hold cryptocurrency as an investment, Revenue treats it in the same way as shares, stocks, or foreign currencies.

• Disposals (selling, gifting, exchanging crypto) are subject to Capital Gains Tax (CGT).
• The annual CGT exemption is €1,270 per individual.
• Net gains above this threshold are taxed at 33%.
• Losses on disposals can be carried forward to offset future gains.
• Regardless of profit or loss, if you dispose of crypto you must file a tax return.

Business Transactions

According to the instructions, direct taxes such as corporation tax, income tax and capital gains tax are applicable, but each case should be reviewed separately, according to the individual facts and circumstances. In general, businesses accepting crypto payments for goods or services should keep records of crypto transactions. No special rules have been introduced so far and taxable profits should be calculated according to the current tax legislation.

Where a company conducts its business transactions through a cryptocurrency, normal accounting and tax rules will need to apply, however the values at the end of an accounting period will need to be converted to Euro and are taxable under “normal CT rules,” the document states. The tax act clearly states that returns must be made in a functional currency, Crypto does not fall into this category just yet.

Revenue have also explained crypto income taxation, as well. “Profits and losses of a non-incorporated business on cryptocurrency transactions must be reflected in their accounts and will be taxable on normal income tax rules,” the notice reads. They have also informed taxpayers that gains, and losses incurred on cryptocurrencies are chargeable or allowable for capital gains tax if they accrue to an individual, or for corporate tax on chargeable gains for companies.

Valuation and record-keeping

The Irish Revenue Commissioners point out that the value of bitcoin and other cryptos may vary between trading platforms. In the absence of a single exchange rate, a “reasonable effort should be made to use an appropriate valuation for the transaction in question,” the manual says, without detailing what “reasonable” and “appropriate” may mean in practice.

No instructions have been given on the taxation of incomes, profits and other flows related to initial coin offerings. The document issued by the Irish revenue service does not say anything about digital tokens and token sales.

Please note that the information above is of a general nature. Tax treatment depends on individual circumstances and may change as Revenue issues new guidance. Always seek professional advice before entering transactions involving cryptocurrency. If you have crypto investments or accept crypto in your business, it’s important and tax advice should be sought in all circumstances before entering any transactions.

Our team at Icon Accounting is here to guide contractors through the complexities of taxation — contact us today for more guidance.