On 27th April 2022 Revenue updated its guidance material to provide clarity on the tax treatment of transactions involving crypto-assets. This latest publication also provides worked examples.
The terms “cryptocurrency” and “cryptocurrencies” are not defined.
The Irish Central Bank places cryptocurrencies, digital currencies, and virtual currencies into the same category of digital money. It is important to bear in mind, however, that although defined in this manner, these “currencies” are unregulated and decentralised which means that no central bank either guarantees them or controls their supply.
Throughout Revenue’s updated document the term “crypto-asset” is used, which includes cryptocurrencies, crypto-assets, virtual currencies, digital money or any variations of these terms. Revenue state that the information contained in their most updated guidance is for tax purposes only.
Under Section TCA97 Ch4 s71–5, an individual who is resident in Ireland but not Irish domiciled is liable to Irish income tax in full on his/her/their income arising in Ireland, and on “non-Irish income” only to the extent that it is remitted to Ireland.
This is known as the remittance basis of taxation.
It’s important to keep in mind that the remittance basis of taxation does not apply to income from an office or employment where that income relates to the performance of the duties of that office or employment which are carried out in Ireland.
Section 29 TCA 1997 is the charging section for Capital Gains Tax.
s29(2) TCA 1997 states that a person who is Irish resident or ordinarily resident and is Irish domiciled is chargeable to Irish CGT on gains on all disposals (on his/her/their worldwide assets) arising in the year of assessment regardless of whether the gains are remitted to Ireland or not.
s29(4) TCA 1997 states that an individual who is Irish resident, or ordinarily resident, but not Irish domiciled is chargeable on gains arising on disposals of Irish assets in the year of assessment as well as on remittances to Ireland in the year of assessment in respect of gains on the disposals of foreign assets. In other words, an Irish resident/ordinarily resident but non domiciled individual is liable to Irish CGT on remittances in respect of gains arising on the disposal of assets situated outside the state.
From professional experience, the location of the crypto asset is often difficult to prove.
According to Revenue’s most recent publication:
“… where a crypto-asset exists ‘on the cloud’, it will not actually be situated anywhere and therefore, cannot be
viewed as ‘situated outside the State’.”
If the crypto-asset isn’t located anywhere and isn’t, therefore, considered to be a “disposal of an asset outside the state” then the remittance basis of taxation does not apply and the gain arising will be liable to Irish Capital Gains Tax based on the residency rules of the individual.
As you can see, it is very much the responsibility of the taxpayer to be able to prove the location where the gain arose on the disposal of the crypto-assets.
Revenue have outlined their record keeping provisions in relation to all taxes as follows: https://www.revenue.ie/en/starting-a-business/starting-a-business/keeping-records.aspx
In situations where the records are stored in a wallet or vault on any device including a personal computer, mobile phone, tablet or similar device, please be aware that these records must be made available to Revenue, if requested.
As with all taxes, full and complete records must be retained for six years in accordance with legislation. It is important to keep in mind that these provisions apply to all taxpayers, including PAYE only taxpayers.
For further information, please follow the link: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-02/02-01-03.pdf
HMRC issued it’s updated Digital Service Tax guidance material today in which it confirmed that cryptocurrencies are unlikely to meet the definition of financial instruments, commodities or foreign exchange and will therefore, not be exempt from the Digital Services Tax. For further information, please click: https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual/crypto48000
This means that exchanges dealing in crypto assets will be subject to the 2% digital services tax on their revenue.
HMRC has confirmed that it will issue ‘nudge letters’ to known UK resident crypto-asset investors who it believes may have underpaid tax on their cryptocurrency transactions.
Therefore, if you have used, bought or sold crypto-assets between 6th April 2020 and 5th April 2021, you should check whether or not you have a reporting obligation to HMRC.
Although the letters are not being sent out to non-UK domiciled individuals, this does not mean that HMRC’s view on the situs tests for crypto-assets has changed. For further information on the location of crypto assets please click: https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual/crypto22600
According to eBrief No. 030/21, Revenue’s Revised Entrepreneur Relief Manual has been updated to reflect an amendment made to the relief under Section 597AA CTA 1997 by section 24 Finance Act 2020.
Revised Entrepreneur Relief is a relief from the standard Capital Gains Tax rate of 33% that would normally apply to the sale of a business.
It applies to individuals disposing of certain business assets.
The relief provides for a 10% rate of CGT to apply to chargeable gains arising on disposals or part disposals of “qualifying business assets” up to a lifetime limit of €1 million.
The term “chargeable business assets” includes:
The term “chargeable business assets” excludes:
The conditions include:
For further information, please click the link: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-19/19-06-02b.pdf
Revenue have confirmed in today’s ebrief No. 124/20 that there is no requirement for a person to include a capital loss in a tax return for the chargeable period in which the loss arises in such circumstances where there is no chargeable gain, arising in the same chargeable period, against which it may be offset.
Revenue’s Tax and Duty manual Part 19-02-05 has been updated.
Paragraph 5.1 clarifies Revenue’s position that, where an allowable loss arises in a chargeable period and there is no chargeable gain arising in the same chargeable period against which it may be offset, then there is no obligation for a person to include the loss in a tax return for the chargeable period in which the loss arises.
For further information, please click the link: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-19/19-02-05.pdf