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
Please be aware that the information contained in this article is of a general nature. It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.
Revenue Compliance Interventions – Income Tax, Corporation Tax, VAT – Risk Review, Revenue Audits and Investigations
The Revenue Commissioners published a new Code of Practice for Revenue Compliance Interventions today which will be effective from 1st May 2022 and will apply to all compliance interventions notified on/after that date. The revised Code applies to all taxes (including Personal Tax, VAT, Corporate Taxes, etc.) and duties, with the exception of Customs. Revenue’s new compliance framework outlines different levels of tax compliance intervention. Briefly, Level 1 interventions are designed to support compliance without the need for a more in-depth intervention. Level 2 interventions comprise a Risk Review or a full Revenue Audit. Level 3 interventions, however, are Revenue Investigations and are used to tackle serious fraud and tax evasion. Once a Revenue investigation is initiated, it is not possible for the taxpayer to make a qualifying disclosure in relation to the matters under investigation.
The revised Code reflects Revenue’s new Compliance Intervention Framework and the key changes include:
Level 1 Interventions are aimed at assisting taxpayers to bring their tax affairs in order voluntarily. They are designed to support compliance by reminding taxpayers of their obligations. They also provide them with the opportunity to correct errors without the need for a more in-depth Revenue intervention. These include the following:
The expected outcomes of Level 1 Interventions:
In Summary:
Important Change
According to the new Code, self-corrections can continue to be made the taxpayer is within the relevant time limits
From 1st May 2022 any such self-corrections must be made in writing.
The submission of an amended return on ROS will no be longer sufficient to qualify as a written notification.
Therefore, to qualify as a self correction, a written notification must be provided as well as any amendment made on ROS.
One of the more fundamental changes to the revised Code is the introduction of the ‘Risk Review’ as a Level 2 Intervention. Level 2 interventions are used by Revenue to confront compliance risks ranging from the examination of a single issue within a Tax Return to a full and comprehensive Revenue Audit. An ‘unprompted qualifying disclosure’ will not be available to a taxpayer who receives notification of a Risk Review in respect of the specified tax head and tax period. Taxpayers will, however, have the option to make a prompted qualifying disclosure when notified of a Level 2 intervention.
There are two types of Level 2 Interventions:
A “Revenue Audit” is an examination of the compliance of a taxpayer. It focuses on the accuracy of specific tax returns, statements, claims, declarations, etc. Broadly speaking, the operation of a Revenue Audit will remain the same under the revised Code. An audit will be initiated where there is a greater level of perceived risk. Also, please keep in mind that an audit may be extended to include additional tax risks depending on information discovered by Revenue during the audit process.
The main stages in a typical Revenue audit are unchanged under the new Code and can be summarised as follows:
Level 3 interventions take the form of Revenue investigations. These would generally be focused on suspected tax fraud and evasion. A ‘Revenue Investigation’ is an examination of a taxpayer’s affairs where Revenue believes that serious tax or duty evasion may have occurred. As the Revenue investigation may lead to a criminal prosecution, it is always recommended to seek expert professional advice and assistance in such situations.
A taxpayer is not entitled to make a qualifying disclosure from the date of commencement of the investigation, however, a taxpayer can seek to mitigate penalties by cooperating fully with a level 3 intervention.
Taxpayers will generally be notified of a Level 3 intervention in writing. However, in certain cases Revenue may carry out an unannounced visit or may carry out investigations without notifying the taxpayer in writing.
Just to reiterate, once an investigation is initiated, the taxpayer cannot make a qualifying disclosure in relation to the matters under investigation.
The main changes in the new Code of Practice for Revenue Compliance Interventions are:
Please be aware that the information contained in this article is of a general nature. It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.