There are no special tax rules in Ireland for buying and selling crypto assets.
Instead, the treatment of crypto assets depends on the general principles of Irish tax law. Irish Revenue have also issued some guidance on particular tax aspects of crypto assets. There is very broad range of crypto assets, with a wide range of features and exposures.
This article focuses solely on the taxation of cryptocurrency assets such as Bitcoin. Different treatments may apply to other crypto assets, such as stable coins and NFTs.
Purchasing assets will generally not, by itself, give rise to any taxes. No stamp duty should generally be payable (once the transaction is effected wholly online), nor should any VAT generally be due.
Irish resident individuals selling cryptocurrency
If an Irish resident individual sells a crypto asset at a profit, any gain would typically be treated a capital gain and subject to capital gains tax (currently 33%). If the individual incurs a loss on the sale, that would typically be treated as a capital loss. Capital losses can generally be carried forward to offset against capital gains realised in the same or subsequent years.
If an Irish resident individual was carrying on a ‘trade’ of dealing in crypto, any profit on the sale of crypto would be subject to income tax, at marginal income tax rates up to 55% (inclusive of universal social charge and social insurance). It is rare for individuals to have established the level and sophistication of commercial activity and infrastructure required to establish that they are ‘trading’ or ‘dealing in’ conventional financial assets (such as shares and securities) and it is expected that it will be equally rare for individuals to be trading or dealing in crypto assets.
Again, no stamp duty should generally arise on the sale of crypto (once the transaction is effected wholly online) and no VAT should generally be due.
Irish resident companies selling cryptocurrency
If an Irish resident company sells crypto at a profit, it will typically be treated as making a capital gain, similar to an individual, and subject to capital gains taxation, currently 33% for companies also. Losses are also typically treated in the same way as individuals.
If an Irish resident company is carrying on a ‘trade’ of dealing in crypto, any profit on the sale of crypto would generally be subject to corporation tax at the rate of 12.5%. It is generally accepted there is less difficulty for a company, compared to an individual, to establish that it is carrying on a trade of dealing in financial assets but there nevertheless remains a high bar in establishing that the company has the necessary substance and sophistication to be carrying on a trade of buying and selling financial assets.
Irish Revenue do not give guidance on the income tax/corporation tax treatment of mining but the UK tax authorities do give guidance. The view of the UK tax authorities is that a person will be subject to income tax or corporation tax when the crypto reward is received by the miner:
- if the mining is being carried out by a person in the course of a trade, then the person will be taxable on the trading profits from the mining, as recognised for accounting purposes. The UK tax authorities give an example that using a home computer while it has spare capacity to mine crypto would not normally amount to a ‘trade’ but purchasing a “bank of dedicated computers to mine” crypto for an expected net profit (taking into account the cost of equipment and electricity) would probably constitute trading activity. Applied in an Irish context, this would mean that individuals carrying on a trade including mining would be subject to income tax (up to 55%) and companies would be subject to 12.5% corporation tax.
- if the mining is being carried out by a person otherwise than in the course of a trade, the UK tax authorities’ view is that the person will be subject to income/corporation tax on the receipt of the crypto as ‘miscellaneous’ income. This presumably is based on the UK tax authorities view that crypto can be described as ‘money’s worth’, as income tax can only be charged on ‘income’ and it is well established that income should be taken to mean ‘money or money’s worth’. On this basis, the euro value (at the time of receipt) of the crypto awarded would be the taxable amount, but with a deduction allowed for any expenses (of a non-capital nature) incurred in earning that crypto. Applied in an Irish context, this would mean the same tax rate for individuals (up to 55%) and a higher tax rate for companies (25%). If the person subsequently sells those mined crypto, the person would also be liable to capital gains tax (33%) on that subsequent sale.
Importantly, this means that mining may trigger a tax liability at a time when the miner has not earned any (fiat) cash. The miner may have to sell some of the crypto to fund this tax liability.
Irish Revenue’s guidance does comment on the VAT treatment of mining and confirms that no VAT charge should arise on the mining of crypto.
There is no Irish guidance on staking. The UK tax authorities have indicated that for income/corporation tax purposes, staking should generally be treated as similar to mining.
Valuation of cryptocurrencies
Irish Revenue acknowledge that there is no single ‘exchange rate’ for cryptocurrencies. A ‘reasonable effort’ should be made to use an appropriate valuation for the transaction in question.
Matheson will continue to keep a watch on developments in this space. If you would like to discuss the legal issues arising out of this publication, please get in touch with Gerry Thorton, Jen Preston, Orla Dooley or your usual Matheson Tax Team contact.