Wondering How to Navigate Crypto Taxes in South Africa? Read our detailed guide on South African Crypto Taxes!
Wondering How to Navigate Crypto Taxes in South Africa? Read our detailed guide on South African Crypto Taxes!
Curious about crypto taxation in Luxembourg for 2023? Our guide covers everything you need to know about crypto taxation in Luxembourg.
Curious about the future of crypto taxation in Malaysia? Explore our 2023 Crypto Tax Guide for expert insights on crypto taxation in the region!
Are you still trying to figure out how much you owe in crypto taxes in Ireland? Then this guide is for you. Because our guide answers important questions like how is crypto taxed in Ireland, how to file your crypto taxes, what documents you will need, and what is the tax deadline. Moreover, it covers tax-saving strategies and exemptions that you can use to reduce your tax bill and it also tells you how Kryptos can make tax filing easier for you.
Note that this guide will be updated regularly to accommodate any new rules or guidelines around crypto taxation. Therefore, we suggest you keep revisiting it from time to time to stay updated.
April 2022- Revenue eBrief No. 095/22
The Revenue considers all cryptocurrencies, tokens, and digital assets to be capital assets just like real estate, equities, or shares. And since all crypto assets are categorized under one term, this means that all digital assets are treated the same for tax purposes, regardless of whether they’re native to a blockchain, or a DeFi protocol.
Any transaction that is seen to be an act of disposal by the Revenue is subjected to capital gains tax. Here’s what the Revenue had to say about the disposal of crypto assets in their latest e-brief:
“The sale, transfer, or redemption of crypto-assets is most likely to be a disposal for CGT purposes unless, based on the facts and circumstances, there is a trade of dealing in crypto-assets being carried on.”
The following transactions are considered as disposal of crypto assets:
A flat 33% CGT is levied on all transactions with a capital gain. Calculating your gains is a pretty straightforward task, it is simply the difference between the sale piece and acquisition price inclusive of any exchange or network fees.
Crypto transactions are also subjected to income tax if you appear to be making an income. Here’s what the Revenue had to say about income-bearing transactions:
“Where a non-incorporated business makes a trading profit or loss on crypto-asset transactions this must be reflected in their accounts and will be taxable by normal IT rules.”
A corporate tax is levied on corporations deriving an income from crypto transactions, but since we’re covering individual taxes here, it goes beyond the scope of this guide.
The following transactions are considered income-bearing transactions:
The simple answer to this is yes. The Revenue can track your crypto transactions. Under the Anti Money Laundering Directives of the EU, all businesses offering crypto-related financial services in the region are required to maintain KYC details of their customers and share them with all member EU states in an attempt to stop money laundering using crypto assets.
Moreover, all crypto exchanges operating in Ireland are expected to be registered as VASPs (Virtual Asset Service Providers) with the Irish Central Bank. This compels exchanges to collect customer data and report it to authorities on request.
Transactions involving blockchain-based applications and tokens are registered on public ledgers and can be tracked easily using tools. Revenue can simply correlate these transactions with the details shared by your exchange to unearth any discrepancies.
Since crypto is categorized as a capital asset by Revenue and you’ll have to pay a capital gains tax whenever you’re seen to be making a gain from the disposal of such assets. Anytime an asset exchanges hands, it is counted as a disposal for tax purposes.
The following transactions will be considered as a disposal of assets:
Ireland doesn’t have a progressive CGT tax and instead levies a flat 33% tax on all transactions resulting in a capital gain above the personal exemption limit. Ireland offers a €1,270 personal exemption limit to both residents and non-residents such that the first €1,270 of their gains in a financial year are non-taxable.
Calculating your crypto gains/losses is a pretty straightforward task. All you need to do is subtract your cost basis from the disposal amount.
But what is the cost basis?
The Cost basis is simply the price (EUR) you paid to acquire the asset inclusive of any additional fees paid to the exchange or network. If you’ve acquired the asset via other sources such as an airdrop, the cost basis will be simply equal to the fair market value of your assets at the time of receipt.
Once you have your cost basis, just subtract it from the disposal amount. If it’s positive, it’s a gain, otherwise, it’s a loss.
Consider the following transactions:
05/01/2023 - Sarah Bough 2 BTC at €15,000 each
12/03/2022 - Sarah Sold 1 BTC for €20,000
15/05/2022 - Sarah bought a watch worth €22,000 with 1 BTC
So the gain from the first disposal i.e. selling the 1st Bitcoin would be €5,000 (€20,000 - €15,000).
And the gain from the second disposal i.e. buying the watch would be €7,000 since the watch is worth €22,000 therefore the disposal amount comes out to be the same as the price of the watch.
Therefore, the total gain = €5,000 + €7,000 = €12,000
But since the Irish authorities offer an exemption of €1,270 on your gains, you can reduce it from your total gains to finally get your taxable base.
Taxable base = €12,000 - €1,270 = €10,730
So your total tax liability comes out to be €3,540.9 (33% of €10,730).
Losses are inevitable as an investor, and although they might not seem like the best thing, you can use them to lower your tax bill. In Ireland, if you’ve made a capital loss i.e. your disposal amount is lower than your cost basis, you can use it as an offset against gains. These losses are categorized as allowable losses and you can even carry them forward to subsequent tax years if you don’t have enough gains in a tax year.
You can even choose to transfer these losses to your spouse or civil partner to be used as an offset against their personal capital gains.
However, Short-term assets, acquired and sold within four weeks, have a distinct rule. Normally, losses from these assets cannot be used to offset gains, except when the gains are derived from a similar short-term asset acquired and sold within the same four-week period.
Crypto thefts and frauds are more common than ever and investors keep losing a lot of money to such fraudulent events. If you’re one such investor, you might be wondering whether tax authorities in Ireland allow for these losses to be claimed as capital losses.
The Revenue is yet to release any guidance on the tax treatment of lost or stolen crypto. However, they do have guidance that covers the tax treatment of lost or destroyed assets, or those of negligible value which states that for lost assets or assets that have lost their value and the holder has no other way of disposing them of, there might be a capital loss consideration equal to the market value of the asset.
All claims for lost or stolen crypto are settled on a case-per-case basis by a revenue inspector, therefore it would be best if you consult an experienced tax accountant for such claims.
Although there is no legal way to avoid crypto taxes entirely, you can use some of the tax-saving strategies mentioned below to lower your tax bill.
The examples we have used so far are primitive and barely represent real-world transactions in terms of complexity. Any investor would agree that calculating the cost basis is far more complicated when multiple assets of the same kind are involved. That’s why you need a cost-basis method to help simplify your cost-basis transactions.
The Revenue is yet to offer any guidance on the specific cost basis method to be used by investors when calculating the cost basis for crypto transactions. However, there is some existing guidance on CGT for shares and securities and since crypto falls in the same category as shares, it’s safe to assume that the same guidance applies to digital assets too.
For the same class of cryptocurrencies acquired on different dates, the FIFO (First-In-First-Out) accounting method is recommended which simply suggests that the first asset you bought will be the first asset you sell.
Consider the following transactions for instance:
Jan 2023 - Bought 1 BTC for €15,000
Feb 2023 - Bought 2 BTC for an average price of €17,000
Mar 2023 - Sold 1 BTC for €20,000
So according to the FIFO accounting method, the first BTC you bought will be the first Bitcoin you sell. So the 1 BTC sold in March 2023 is the same one that was bought in January 2023.
So your cost basis for CGT calculations will be €15,000.
Note that there is one exception to this guideline which states that any asset bought and disposed of within 4 weeks is simply the most recently acquired one. This prevents investors from manufacturing artificial losses.
Losses made from assets acquired and disposed of within four weeks can only be used as an offset against those assets of the same kind that have been acquired and disposed of within the same four-week period.
As previously mentioned, some transactions are viewed as income-bearing transactions by the Revenue and attract income tax. Although there’s no clear guidance on what kind of transactions are considered to be income-bearing transactions by the Revenue, here are some transactions that will most probably be viewed as the same:
Ireland has two income tax slabs based on how much your earn and your individual circumstances as an investor.
Note that there are multiple credits, and allowances offered by the Revenue to lower your tax bill. You can visit Revenue. ie to know more.
Calculating your crypto income is a pretty straightforward process. All you need to do is identify the fair market value of your assets at the time of receipt and add them to get your total income. You’ll pay 20 or 40% tax on your total income based on which tax slab you fall in.
Consider the following series of transactions:
01/01/2022 - Sheila received 5 ETH tokens in an airdrop (worth €1,200 each)
03/04/2022 - Sheila received 6.25 BTC as a mining reward (worth €15,000 each)
05/05/2022 - Sheila received 3 ETH tokens as a staking reward (worth €1,500)
Now the total income on receipt would be = €(1,200*5 + 15,000* 6.25 + 1,500*3)
= €(6,000 + 93,750 + 4,500)
Assuming that you’re an individual with no dependent children, you would fall into the 40% tax bracket.
So your total tax liability would come out to be €41,700.
Here are some tax-free transactions in Ireland:
Here are some of the taxed crypto transactions:
Mining rewards are subjected to income tax in Ireland upon receipt if you’re an individual investor and may be further subjected to CGT when you dispose of them by selling, swapping, or gifting them. If you’re involved in mining activities as a business, your income will be subjected to corporation tax instead.
There are some allowable expenses linked to mining like electricity bills, equipment costs, and operational expenses that you can use to write off your tax bills.
There is no specific tax guidance in Ireland regarding staking as of now. However, staking rewards are expected to be treated the same way as mining rewards from a tax perspective. Consequently, staking rewards will be taxed as income when received, and if the crypto is sold later, the proceeds will be subject to capital gains tax, with the cost base equal to its original value upon receipt.
Airdrops, regardless of whether you receive them for participation in project promotion or for completing a task, will most likely be subjected to income tax on receipt, the cost basis of tokens received from airdrops would be equal to the fair market value of the tokens upon receipt.
There is no specific guidance on how forks are treated for tax purposes. However, it can be extrapolated from the existing guidelines that their tax treatment will be no different than airdrops. Soft forks aren’t a taxable event because no new tokens are generated in the process. Hard forks on the other hand may attract income tax as new tokens are created and redistributed among blockchain participants.
Revenue released a new set of guidelines covering the capital acquisition tax on crypto gifts and inheritance. The guidance states that a CAT might apply to crypto assets received as gifts or inheritances.
The general CAT guidelines state that the CAT will apply to the market value of the assets on receipt. However, there are certain lifetime exemption limits offered by the Revenue, and if you’re below a certain threshold then these assets are non-taxable.
There are multiple CAT groups with different exemption limits. Group A is gifts from parents, Group B is from immediate family members, and Group C is from anyone not covered in Group A or Group B.
If the total value of gifts from any group exceeds the lifetime exemption amount, any assets received as gifts and donations will be subjected to a flat 33% CAT. Note that assets received from your spouse or civil partner are not subjected to CAT.
Also, gifts valued below €3,000 from a single person in a fiscal year are exempt from (CAT).
There is no guidance on how income from margin trades, crypto futures, and CFDs is taxed so we recommend seeking guidance from an experienced tax accountant for income from such sources.
However, you must know how margin and future trades differ to better understand their tax implications. In margin trades, you borrow funds (leverage) to take capital-intensive positions, and future trades are speculative trades where you predict the price movements of a certain asset over a fixed-time contract.
The best way to steer clear of any future tax complications would be to treat any profits from such trades as a capital gain and pay CGT on them.
There is no specific guidance on how ICOs are treated for tax purposes. Although it would be safe to assume that any income from ICOs would be subjected to income tax just like mining and staking rewards in light of the existing guidelines. However, we are constantly on the lookout for new guidelines and new details will be added here as soon as we get access to them.
Although the scope and utility of NFTs differ from that of crypto assets, they’re treated the same for tax purposes. So if you dispose of an NFT by selling, swapping, or gifting them, any gains would be subjected to CGT. While, if you’re an artist creating your NFTs and selling them at a marketplace, that may be viewed as an additional income and would therefore attract income tax liabilities.
Artists do enjoy an Income Tax Exemption on NFTs however whether this guidance applies here or not is yet to be declared. We suggest contacting an experienced tax advisor for more details on the same.
There is no specific guidance on how income from DAOs is taxed in Ireland. We are constantly on the lookout for any new guidance on this and relevant details will be added here as soon as we get access to them.
The Revenue is yet to declare any guidance on how DeFi transactions are viewed from a tax perspective. However, that does not mean all DeFi transactions are exempt from taxes. You have to consider the existing guidelines to extrapolate the tax treatment of your DeFi transactions.
The best approach would be to contact an experienced tax advisor to seek guidance on the taxation of such transactions.
Here’s what we could infer from the existing Revenue guidelines about the taxation of some DeFi transactions.
DeFi protocols use liquidity pools, such as dex, lending, or staking protocols. The tax treatment depends on how the pool operates. For instance, trading on a dex like Uniswap involves calculating capital gains or losses when disposing of a crypto asset. Adding capital to liquidity pools to earn rewards can be more complex. Often, adding capital results in receiving a liquidity pool token, which is considered a crypto-to-crypto trade and requires recognizing a capital gain or loss.
The way rewards are paid out also affects taxation. If rewards are earned through a token that increases in value, no gain is realized until the capital is withdrawn. This is similar to a disposal and requires calculating capital gains or losses. However, not all rewards are distributed this way. Some DeFi protocols provide new tokens as rewards, sometimes using both liquidity pool tokens and new tokens. Earning new tokens can be treated as additional income, requiring identification of the fair market value in EUR on the day received and payment of income tax on that amount.
Here are the important tax deadlines in Ireland related to crypto taxes:
You can also file your taxes using paper forms based on whether you’re self-employed or a PAYE worker.
If you’re a PAYE worker, you should use Form CG1 meant for self-assessment and filing capital gains tax returns.
If you’re self-employed or a chargeable person, you should use Form 11 meant for self-assessment and filing income tax returns.
A chargeable person is an individual who meets either of the following criteria in a year:
The Revenue has clear guidelines on record keeping, unlike most tax authorities across the globe. Here are the documents you should maintain according to the guidelines:
It is crucial to maintain proper records as the tax authorities emphasize the requirement to provide records to Revenue upon request. Additionally, you must retain your records in compliance with legislation, keeping them for six years.
Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:
If you still need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.
There’s no legal way to avoid crypto taxes entirely and doing so might attract legal trouble. However here are some strategies you can employ to lower your tax bill.
1. Is Crypto Legal in Ireland?
Yes, cryptocurrency is legal in Ireland. The Central Bank of Ireland (CBI) has issued several warnings about the risks associated with cryptocurrency investment, but there is no blanket ban on the use or ownership of cryptocurrencies.
In 2020, the CBI published a statement on its website clarifying that cryptocurrency is not legal tender in Ireland and is not regulated by the CBI. The statement also warned that cryptocurrency investment is high-risk and investors should be aware of the potential for fraud and loss.
Despite the CBI's warnings, several cryptocurrency companies are operating in Ireland. These companies are not regulated by the CBI, but they are subject to the same laws and regulations as any other business in Ireland. For example, they must comply with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.
2. What happens if you don’t pay taxes on Crypto?
Failure to pay taxes on cryptocurrency in Ireland can result in penalties, fines, and potential imprisonment. The Irish Revenue may impose fines based on the specific circumstances, with a maximum fine equivalent to 100% of the tax evaded, effectively doubling the original tax liability. Additionally, overdue taxes are subject to a daily interest of 0.0219%.
If convicted of tax evasion, individuals can face imprisonment for a maximum of 12 months. In more severe cases, if indicted or found guilty, the penalty can extend up to five years of imprisonment.
3. How is Crypto Taxed in Ireland?
In Ireland, cryptocurrencies are considered capital assets, similar to real estate or equities. All digital assets, including cryptocurrencies, tokens, and digital assets on blockchains or DeFi protocols, are treated equally for tax purposes.
The following transactions are considered as disposing of crypto assets:
A flat 33% Capital Gains Tax (CGT) is applied to all transactions that result in a capital gain. Calculating the gain is straightforward, as it is the difference between the sale price and the acquisition price, including any fees incurred during the exchange or network transfer.
For corporations earning income from crypto transactions, corporate tax applies, but that is beyond the scope of this guide, which focuses on individual taxes.
The following transactions are considered income-bearing transactions:
4. How can Kryptos help you in filing your crypto taxes?
We agree that filing your crypto taxes is an unreasonably complicated task, even for someone with a fair amount of prior knowledge. However, there’s an easy way to file your crypto taxes using a crypto tax software called Kryptos.
All you need to do is log in on the platform, add all your trading accounts, wallets, and DeFi accounts and sip coffee while Kryptos does all the heavy lifting. The platform can auto-fetch all your transactions from the tax year and generate a legally compliant tax report within minutes while suggesting ways to lower your tax bill. It works like magic. All you need to do is try it once.
All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!