A lot more people in Ireland are getting interested in crypto assets – such as ‘cryptocurrency’ and Non-Fungible Tokens (‘NFTs’)
A 2021 survey by the Consumer and Competition Protection Commission found that 8% of adults aged 18+ in Ireland had invested in Bitcoin or other crypto assets. That equates to around 290,000 people.
Some people will have made large gains on cryptocurrencies such as Bitcoin , Ethereum and Dogecoin. Many may also have made losses.
Many of those people that have invested in, or speculated on, cryptocurrency may not be aware that tax will usually be due on any profits they make.
This article provides some basic information about Taxation of Cryptocurrency and NFTs in Ireland.
Check out our page that provides some information on where you can trade cryptocurrencies in Ireland
It is important to know that Cryptotoassets are highly volatile unregulated investment products. There is no EU investor protection.
How much tax do you pay on Cryptocurrency or NFTs ?
Investing or Trading ?
A deciding factor on the taxation of cryptocurrency transactions is whether they are seen as an investment or are part of a business or trade.
If the transactions are regarded as being a trading activity of a business – the profits will be subject to income tax or corporation tax.
Where a profit or loss on a crypto-asset transaction is not subject to income tax/corporation tax, it will normally be taxable under Capital Gains Tax rules.
Revenue will usually treat the vast majority of trading in crypto or NFTs by individuals in Ireland as an investment rather than a business.
Capital Gains Tax on Cryptocurrency Investments
An investment in Bitcoin or any other cryptocurrency or NFT is treated in a similar way to any other investment in Ireland.
If you make a profit when disposing of (selling, gifting or exchanging ) your NFT or cryptocurrency, you are supposed to declare it to Revenue for Capital Gains Tax (CGT).
CGT in Ireland is currently charged at a rate of 33%, but the first €1,270 of gains in a year are exempt from CGT.
Example of Capital Gains Tax on Cryptocurrency in Ireland
- You purchase Bitcoin in January 2021 at a cost of €5,000 including exchange fees.
- You sell the Bitcoin in December 2021 for €8,000 (after exchange fees)
- Chargeable Gain €3,000
- Deduct: Personal CGT exemption of €1,270
- Net Chargeable Gain = €1,730
- CGT chargeable @ 33% Capital Gains Tax due= €570.90
- Profit after CGT = €2429.10
Under Irish CGT rules, capital losses on cryptocurrency or NFT investments can be offset against gains in the same year or future years. This is the same as any other capital gains or losses. See CGT Guidance at Revenue
It is important to note that a gain or a loss arises when a crypto asset is disposed of. This could be in exchange for regular (fiat) currency or other crypto-asset. For example, an exchange of Bitcoin for Dogecoin would be a disposal of Bitcoin and an acquisition of Dogecoin. The taxable gain (or loss) would be calculated by reference to the Euro equivalent values at the time of the exchange and at the time the Bitcoin was originally acquired.
For example – if you bought Bitcoin worth €1000 in Jan 2020 and grew to a value of €4000 in 2021 – if you then exchanged it all for Dogecoin you would be liable for CGT on the €3000 gain. (Less any personal exemption)
It is also worth noting that a return to Revenue of all disposals and acquisitions of assets are required each year for Irish taxpayers.
CGT on shares is slightly different. See more here about Capital Gains Tax on Shares in Ireland
Income Tax on Cryptocurrency Trading
Individual taxpayers that are trading in cryptocurrency as a business will be liable to income tax on the profits.
Profits and losses of a non-incorporated business (i,e.sole traders) on cryptocurrency transactions must be reflected in their accounts and will be taxable on normal Income Tax rules.
The profits and losses of an incorporated company entering into transactions involving cryptocurrency should be reflected in accounts and will be taxable under normal Corporation Tax rules.
Revenue does not treat cryptocurrencies as a functional currency – therefore business accounts, for tax purposes, cannot be prepared in cryptocurrencies. Euro or other functional currency accounts must be prepared.
PAYE Income Tax on Cryptocurrency in Ireland.
Where the wages of an employee are paid in a cryptocurrency, the value for the purposes of calculating payroll taxes is the Euro amount attached to the cryptocurrency at the time the payment is made to the employee.
Returns to Revenue must be shown in Euro amounts and remittances made appropriately.
Capital Acquisitions Tax (Gift Tax) on Cryptocurrency in Ireland
Inheritance tax/gift tax
The receipt of an inheritance or gift of a crypto-asset would be subject to capital acquisitions tax (“CAT”). In the same way as any other gift of money or assets.
CAT is currently 33% on the value of the crypto-asset on the valuation date , subject to reliefs
More here about Capital Acquisitions Tax
Valuation of Crypto Assets
Unlike shares or commodities, the value of cryptocurrencies may vary between exchanges. Therefore, there is not always a single “exchange rate” for cryptocurrencies.
Revenue states that “a reasonable effort should be made to use an appropriate valuation for the transaction in question.”
You might be interested in reading about Spread Betting – which is tax free in Ireland.
Warning – a high percentage of people lose money when spread betting.