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
Today, 14th April 2022. the Irish Revenue published guidance (Revenue eBrief No. 090/22) on the tax treatments of Ukrainians, who continue to be employed by their Ukrainian employer while they perform the duties of their employment, remotely, in Ireland.
The Guidance material outlines a number of concessions which will apply for the 2022 tax year.
As you’re aware, income earned from a non-Irish employment, where the performance of those duties is carried out in Ireland, is liable to Irish payroll taxes irrespective of the employee’s or employer’s tax residence status. However, by concession, the Irish Revenue are prepared to treat Irish-based employees of Ukrainian employers as not being liable to Irish Income Tax and USC in respect of Ukrainian employment income that is attributable to the performance of duties in Ireland.
Ukrainian Employers will not be required to register as employers in Ireland and operate Irish payroll taxes in respect of such income.
Please be aware that this concession only relates to employment income which is (a) paid to an Irish-based employee (b) by their Ukrainian employer.
In order for the above concessions to apply, two conditions must be met:
The Irish Revenue will disregard for Corporation Tax purposes any employee, director, service provider or agent who has come to Ireland because of the war in Ukraine and whose presence here has unavoidably been extended as a result of the war in Ukraine.
Again, such concessionary treatment only applies in circumstances where the relevant person would have been present in Ukraine but for the war there.
For any individual or relevant entity availing of the concessional tax treatment, it is essential that he/she/they retain any documents or other evidence, including records with the individual’s arrival date in Ireland, which clearly shows that the individual’s presence in Ireland and the reason the duties of employment are carried out in the state is due to the war in Ukraine. These records must be retained by the relevant individual or entity as Revenue may request such evidence.
For further information, please follow link: https://www.revenue.ie/en/tax-professionals/ebrief/2022/no-0902022.aspx
Today the Irish Government announced the following measures to help with the rising costs of energy, in addition to the cost of living measures of €2 billion which were previously announced:
The Minister for Finance also confirmed that the Public Service Obligation (P.S.O.) Levy will be set to zero by October 2022.
For full information, please follow link: https://www.gov.ie/en/press-release/0a129-government-announces-further-measures-to-help-households-with-rising-cost-of-energy/?_cldee=lcXqBawaGsFsOWw3I_ME4giIjrsplWXd-72lcBtEruyHtX5gNJK0C75jcfN8DtDRoL9I-M69U5_UiLjbKHtHpQ&recipientid=contact-baa265b900fae71180fd3863bb3600d8-34a5f9f973f64e0ead12cc385e40b831&esid=f492a4af-0abc-ec11-983f-6045bd8c5c09
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
Section 18 of the Finance Bill 2021 brings non Irish resident companies, in receipt of Irish rental income, within the charge to Corporation tax. Previously these companies were liable to income tax on their Irish rental profits.
Prior to the Finance Act 2021 amendment, non Irish resident companies, where no Irish branch existed, were liable to income tax at 20% on their rental income while Irish tax resident companies were, instead, liable to corporation tax at 25% on their rental income.
In circumstances where non-resident companies dispose of assets which had previously generated Irish rental income, any chargeable gains are now within the charge to corporation tax at 33% as opposed to capital gains tax, which is also at 33%. In other words, this amendment does not give rise to any additional tax as the effective rate of tax is 33% but the Corporate Tax rules now apply as opposed to the Capital Gains Tax rules.
There are no restrictions on the carry forward of rental losses and capital allowances in the change from the income tax regime to the corporation tax rules.
The payment date for certain affected companies’ preliminary corporation tax for 2022 has been adjusted. Those companies whose accounting period ends between 1st January 2022 and 30th June 2022 have until 23rd June 2022 to pay preliminary corporation tax in a further measure to ease the transition from the Income Tax to the Corporation Tax regime.
From today, non-resident corporate landlords will now also be subject to the new interest limitation rules which have been introduced to comply with the EU’s Anti-Tax Avoidance Directives. These new rules link the taxpayer’s allowable net borrowing/financing/leverage costs directly to its level of earnings. The ILR does this by limiting the maximum tax deduction for net borrowing costs to 30% of Tax EBITDA. In other words, the ILR will cap deductions for net borrowing costs at 30% of a corporate taxpayer’s earnings before interest, tax, depreciation, and amortisation, as measured under tax principles.
On 21st December 2021, the Government announced the expansion of supports for businesses impacted by public health restrictions that came into effect from 20th December 2021 to 31st January 2022 including changes to:
A summary of the developments to the schemes is outlined below.
On 9th December 2021 it was announced that the enhanced subsidy rates under the EWSS will continue until 31st January 2022. In other words these enhanced rates will be paid in respect of payroll submissions which have pay dates in December 2021 and January 2022.
Today, Minister Donohoe confirmed that the EWSS will also be reopened for certain businesses who would not otherwise be eligible for the scheme.
Employers can re-join the scheme from January 2022 if they meet the following conditions:
Employers who qualify for re-entry to the EWSS will receive support from 1st January 2022 onwards. These businesses can remain in the scheme until its expiry date of 30th April 2022.
Please bear in mind that the business must experience a 30% reduction in (a) turnover or (b) customer orders during a particular reference period to qualify.
Businesses that commence trading operations from 1st January 2022 onwards will not be eligible for the scheme.
For further information, please click: https://www.revenue.ie/en/corporate/press-office/budget-information/2021/crss-guidelines.pdf
From 20th December 2021, the CRSS opens to businesses within the hospitality and indoor entertainment sector such as bars, restaurants and hotels as well as theatres and cinemas that are now required to close by 8pm each night until 31st January 2022.
The eligibility criteria regarding the reduction in turnover has also increased to no more than 40% of 2019 turnover. Previously it was no more than 25% of the 2019 turnover.
Companies, self-employed individuals and partnerships that carry out a taxable trade can apply for the CRSS.
A qualifying person who meets the revised eligibility criteria can make a claim to Revenue in respect of each week that the eligible business/trading activity is affected by the imposed Covid restrictions.
A qualifying person who carries on such a business is eligible to make a payment claim under the Covid Restrictions Support Scheme if:
For businesses established in the period between 13th October 2020 and 26th July 2021, they are eligible to apply for support under the scheme, however, they are first required to register for CRSS via ROS. It will only be possible to make a claim once the business has an active CRSS registration.
If the eligible business meets the revised criteria to qualify for the scheme and has previously received CRSS payments in relation to a business premises carrying out a trading activity which was affected by the current public health restrictions, this business can make a CRSS claim using the ROS e-Repayments facility from 22nd December 2022.
Claims can be made in blocks of up to three weeks at a time. The respective amounts due will be paid by Revenue in one single payment. The normal repayment period is three days from the date the claim was submitted.
In circumstances where a qualifying person carries on more than one eligible business activity from separate/different business premises, then it is possible to make a separate claim in relation to each trading /business activity.
If it’s possible for the business to reopen without having to prevent or significantly restrict access to it’s premises, then this business will not qualify for CRSS. A business will not be eligible for the CRSS for periods where it chooses or decides not to open.
In situations where it is not feasible for a qualifying person to continue carrying on a relevant business activity during the period of restrictions, a claim for support under the CRSS can still be made. This is on condition that the eligibility criteria have been met. In order to qualify, the person must have actively carried on the relevant business activity up to the date the latest public health restrictions were imposed and must intend to continue carrying on that same activity once those restrictions have been eased.
The weekly payment is calculated as follows
For the purposes of the CRSS, the “Average weekly turnover” is defined as:
For further information, please click the link: https://www.revenue.ie/en/corporate/press-office/budget-information/2021/crss-guidelines.pdf
The Revenue Commissioners have confirmed that November/December 2021 VAT liabilities and December 2021 PAYE (Employer) liabilities will be automatically warehoused for businesses which are already availing of the scheme.
The Government confirmed that the Covid restricted trading phase of the Debt Warehousing Scheme (Period 1) will be extended by three months to 31st March 2022 for taxpayers who are eligible for the COVID-19 support schemes. This effectively means that tax debts arising for such affected businesses in the first three months of 2022 can be warehoused.
The zero interest phase of the Debt Warehousing Scheme or Period 2 will begin on 1st April 2022 for those businesses and will run until 31st March 2023.
For further information, please click the link: https://www.revenue.ie/en/corporate/communications/documents/debt-warehousing-reduced-interest-measures.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
The Revenue Commissioners acknowledge the on-going efforts by taxpayers and agents and in light of the current Covid-19 developments, the Pay and File deadline for ROS customers has been extended to Friday, 19th November at 5.00pm.
For full information, please follow link: https://www.revenue.ie/en/tax-professionals/ebrief/2021/no-2112021.aspx