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
The VAT reclaim provisions contained in s74(4) VATCA 2010 have been abolished with effect from 1st January 2022.
From 1st January 2022, a key change in the Finance Bill 2021 has been introduced in relation to the VAT treatment of cancellation fees, including non-refundable or forfeited deposits, retained by business in the event of a customer cancellation.
Cancellation fees including forfeited deposits would be liable to VAT on the basis that they are either (a) a payment for a vatable service or (b) a right to access a vatable service. This is especially relevant to businesses in the tourism industry including hotels and restaurants.
In this amendment, it would appear that the Irish Revenue Commissioners are applying the CJEU judgements in:
They also appear to be following HMRC’s lead, which, with effect from March 2019, changed its legislation stating that VAT would remain due on retained payments for unused services and uncollected goods.
Prior to 1st January 2022 the Irish Revenue Commissioners had taken the view that if the supplier received a deposit from a customer that the deposit should be treated as an advance payment and VAT would be due when the deposit is received. If, however, the supply didn’t proceed then the vendor/supplier could claim a repayment of the VAT on the deposit. This was on the basis that the receipt of the deposit was not considered to be VATable because no supply of service had taken place. In other words, prior to the amendment in the Finance Act 2021, if the actual supply didn’t proceed, the supplier or vendor could still claim a refund of VAT which it previously accounted for on receipt of the non-refundable deposit.
Pre 1st January 2022, a number of conditions were needed to apply:
The Finance Act 2021 change has deleted from our legislation the previous entitlement of suppliers to reclaim a refund of VAT in respect of the non-refundable deposit, however, it does not affect the VAT treatment of deposits that are refunded to customers. The VAT relief should still be available on those deposits.
For further information, please click: https://www.revenue.ie/en/tax-professionals/documents/notes-for-guidance/vat/vat-guidance-notes-fa2021.pdf
From 1st July 2021 there will be major changes including:
1. The extension of the VAT Mini One Stop Shop (MOSS) to the One Stop Shop (OSS)
The Mini One Stop Shop (MOSS) has been in existence since 2015 and currently only covers the supply of telecommunications, broadcasting and electronic services from business to non-business customers (B2C) services within the EU.
Prior to the introduction of MOSS, it was possible for a business to have a VAT registration obligation in several jurisdictions. By opting to use MOSS, however, that business is able to report its sales for all EU member states via one single quarterly return made to one Member State thereby notifying the Revenue Authorities in that jurisdiction of TBE sales in other EU Member States as well as facilitating the payment of VAT. There are currently two types of MOSS scheme in existence: one for businesses established within the EU and the other for those established outside the EU.
From 1st July 2021, MOSS will become the One Stop Shop (OSS).
The scope of transactions covered by this declarative system will be extended to all types of cross-border services to the final consumers within the EU as well as to the intra-EU distance sales of goods and to certain domestic supplies which are facilitated by electronic interfaces.
The choice of the EU Member State in which a business can register for the One-Stop-Shop will depend on where they are established and whether they have one or more fixed establishments within the EU.
The use of the VAT One Stop Shop procedure will be optional.
Those businesses who opt for the procedure will only be required to submit a single quarterly return to the tax authorities of the country of their choice, via a dedicated OSS web portal. They will be required to apply the VAT rates applicable in the consumer’s country.
If the OSS is not availed of, then the supplier will be required to register in each Member State in which they make supplies to consumers.
Businesses will be required to follow certain rules, including the sourcing and retaining of documentary evidence in relation to where the customer is located in order to determine the country in which the VAT is due.
In summary, from 1st July 2021, the MOSS Scheme will become the One Stop Shop and will include the following: (i) B2C supplies of services within the EU other than TBE services, (ii) B2C Intra-EU distance sales of goods, (iii) Certain domestic supplies of goods which are facilitated by electronic platforms/interfaces and (iv) Goods imported from third countries and third territories in consignments of an intrinsic value up to a maximum value of €150.
2. Current distance selling thresholds will be abolished.
For the intra-EU distance sales of goods, the thresholds amounts of €35,000 to €100,000 within the EU will be abolished.
Currently a supplier who sells to consumers from other EU member states by mail order is obliged to register for VAT in the country to which the goods are delivered once the threshold amount has been reached.
From 1st July, however, the current place of supply threshold of €10,000 for Telecommunications, Broadcasting and Electronic services will be extended to include intra-Community distances sales of goods.
This €10,000 threshold will cover cross-border supplies of TBE services as well as the intra-Community distance sales of goods but will not apply to other supplies of services. This will result in a requirement to register for VAT in multiple jurisdictions, where the total EU supplies of goods and TBE services to consumers exceed €10,000 per annum.
To avoid this obligation the EU OSS scheme can be availed of.
In situations where the value of the sales does not exceed or is unlikely to exceed this threshold amount of €10,000, then local VAT rates may be applied instead of the VAT in the country of the consumer. In other words, in such circumstances an Irish business can charge Irish VAT on its supplies.
In summary, from 1st July 2021, the individual EU Member State’s distance selling thresholds will be abolished and replaced with an aggregate threshold of €10,000 for all EU supplies. Please be aware that this exemption threshold will not apply on a State by State basis nor will it apply to separate income streams. It is calculated taking into account all TBE services and intra-community distance sales of goods in all EU states.
3. VAT exemption at importation of small consignments of a value of up to €22 will be removed
Currently, imports of goods valued at less than €22 into the EU are not liable to VAT on importation. From 1st January 2021 the low value consignment stock relief for goods valued at €22 or below will be abolished resulting in all goods being imported into the EU now being liable to VAT.
For consignments of €150 euros or below, however, a new import scheme will apply. The seller of the goods or, in the case of non-EU retailers, the agent, will only be required to charge VAT at the time of the sale by availing of the Import One Stop Shop. If they decide not to opt for this scheme, they will be able elect to have the import VAT collected from the final customer by the postal or courier service.
4. Special provisions where online marketplaces/ platforms facilitating supplies of goods are deemed for VAT purposes to have received and supplied the goods themselves i.e. deemed supplier provision
Over the last number of years, there has been considerable growth in online marketplaces and platforms providing B2C supplies of goods within the EU. Currently, however, this environment is difficult to monitor and as a result, businesses established outside the EU are slipping through the VAT net.
From 1st July Special provisions will be introduced whereby a business facilitating sales through the use of an online electronic interface will be deemed, for VAT purposes, to have received and supplied the goods themselves – this will be known as the “Deemed Supplier” Provision.
In other words, the online marketplace / platform provider will be viewed as (a) buying and (b) selling the underlying goods and will, therefore, be required to collect and pay the VAT on relevant sales.
Digital marketplaces will be responsible for collecting and paying VAT in relation to the following cross-border B2C sales of goods they facilitate:
The payment and declaration of VAT due will be made by the Electronic Interface through the One Stop Shop system for Electronic Interfaces.
The Import One Stop Shop (IOSS) will apply to supplies made via an Electronic Interface where this online market/platform facilities the importation of goods from outside the EU.
The deeming provision will not apply in situations where the taxable person only provides payment processing services, advertising or listing services, or redirecting/transferring services in circumstances where the customer is redirected to another online market/platform and the supply is concluded through that other electronic interface.
Online Markets/Platforms will also be required to retain complete documentation, in electronic format, in relation to their sellers’ transactions for the purposes VAT audits/inspections.
The application of this provision is mandatory for traders/taxable persons. The use of the other schemes, however, will be optional.
5. The introduction of the Import One Stop Shop
There is currently a VAT exemption in relation to the importation (from outside the EU) of consignments valued at less than €22. From 1st July this exemption will be abolished and as a result, all goods imported into the EU will be liable to VAT.
The current customs duty exemption covering distance sales of goods imported from third countries or third territories to customers within the EU up to a value of €150 remains unchanged providing the trader declares and pays the VAT, at the time of the sale, using the Import One Stop-Shop.
For Non EU based suppliers there are two options:
With regard to the appointment of an intermediary for the purposes of IOSS, please be aware that:
The IOSS will facilitate traders registering and declaring import VAT due in all Member States through a single monthly return in the Member State in which they have registered for the Import One Stop Shop scheme.
Where the IOSS is used, the supplier will charge VAT to the customer at the time of the supply and, as a result, the goods will not be liable to VAT at the time of importation. The VAT collected by the supplier will then be submitted through their monthly IOSS return.
The use of this scheme is not mandatory.
As the supplier/taxable person will only be required to register for IOSS in one Member State this will considerably reduce the administrative burden involved in accounting for VAT. After registration for IOSS, the supplier will be issued an IOSS identification number and this should expedite customs clearance.
If, however, the IOSS Scheme is not availed of, the supplier will be able to use another simplification procedure for the purposes of importing goods at a value not exceeding €150 whereby the import VAT may be collected by the postal services, courier company, shipping/customs agents, etc. from the customer, and the operator will then report and pay the VAT over to the relevant Revenue Authority on monthly basis. This special arrangement will only apply where both conditions are met: (i) the IOSS has not been availed of and (ii) where the final destination of the goods is the Member State of importation.
The special arrangement allows for a deferred payment of VAT on the same basis.
In summary, the purpose of the IOSS is that suppliers who import goods into the EU can declare and pay the VAT due on those goods through the Import One Stop Shop in the member state where they have registered for the scheme.
The standard rate of Irish VAT is due to increase to 23% with effect from 1st March 2021.
The rate had been reduced to 21% for a six month period from 1st September 2020 to 28th February 2021.
Please be aware that the VAT rate reduction from 13.5% to 9% for certain goods and services, mainly within the tourism and hospitality sectors, will continue to apply until 31st December 2021. Please follow link for more details: https://www.revenue.ie/en/vat/vat-rates/what-are-vat-rates/second-reduced-rate-of-value-added-tax-vat.aspx
To prepare for the VAT rate change, there are a number of practical issues that taxpayers should consider as follows:
1. Update your Systems
2. Amend your Pricing structure if necessary.
3. Review and/or Revise your Contracts
4. Amend your Sales invoices
5. Don’t forget the Reverse Charge Mechanism especially for invoices dated pre 28th February but in circumstances where they’re received after 1st March 2021.
6. Credit notes – If you initially raised an invoice charging 21% VAT but the customer requests a credit note after the VAT rate has changed i.e. after 1st March 2021, please be aware that you may be required to apply the 21% rate after the VAT rate has returned to 23%.
7. If your business pays VAT to Revenue on a monthly direct debit basis, you should check to see if you’re required to increase this amount after 1st March 2021.
8. Consider how to account for payments on account which are received in advance of the VAT rate change.
9. Annual Return of Trading Details – Please be aware that the Annual Return of Trading Details deadline date has been extended from 23rd January to 10th March 2021 to take account of the rate change in 2020.