Ireland Crypto Tax Guide 2023

Cryptocurrency taxation in Ireland can be a complex matter. This comprehensive crypto tax guide for Ireland aims to help taxpayers better understand their obligations and the process of filing their cryptocurrency taxes, including any recent updates to the rules.

Is crypto taxed in Ireland?

Yes, crypto is taxed in Ireland.

In Ireland, the Irish Tax and Customs office (Cain agus Custaim na hEireann) has specified that crypto is subject to capital gains and income tax. Corporate tax rates may apply for businesses using crypto for payments, holding it on their balance sheet or actively trading.

How is crypto taxed in Ireland?

Crypto is taxed differently in Ireland depending on the exact transaction that is taking place. Different transactions may be subject to:

• capital gains tax
• income tax
• capital acquisition tax

For companies involved in the holding or trading of crypto, corporation tax may apply. This guide will focus on individual taxes in Ireland.

Non-Taxable crypto activities in Ireland

There is some good news for crypto investors and traders based in Ireland. In Ireland, some activities are deemed non-taxable. These include:

• buying crypto
• holding crypto
• transferring crypto between wallet or exchanges accounts that have the same owner

Does the Irish Tax and Customs office know about my crypto?

Despite popular opinion, cryptocurrency is extremely easy to track and is not as anonymous as many believe. Due to much stricter regulation around cryptocurrency exchanges and digital asset investment, almost all exchanges require users to complete a ‘Know-Your-Customer’ (KYC) identification application before the account can be used to purchase crypto. If you have signed up for any exchange which required this check, it is highly likely that the Irish Tax and Customs Office has your user record from that exchange. Withdrawals to external wallets are also tracked, and it is a simple process to follow the money trail from an exchange account to external wallets due to the availability of data on public blockchains.

The European Union’s sixth Anti-Money Laundering Directive means that any company that provides financial services to customers or other businesses must adhere to stricter regulations regarding customer identification. This directive also means that data is made available between EU member states, so signing up for an exchange in another EU country does not mean that the Irish Tax and Customs Office cannot access your data.

The European Commission’s proposed Directive on Administration cooperation (DAC8) is a step towards stricter regulation regarding cryptocurrency ownership and trading. The proposed update will likely take effect in the next 12 months, increasing data availability on cryptocurrency owners to financial authorities across EU member states to address tax evasion or fraud. Once this takes effect, DAC8 may allow the Irish Tax and Customs Office to specifically search if a person owns cryptocurrency, as well as other information such as holdings, transaction history and withdrawal addresses.

The Importance of Keeping Records

While some crypto enthusiasts consider Bitcoin a currency, the tax authority in Ireland does not. Most importantly, this means that you must keep, not just Bitcoin but all cryptocurrency records in a single fiat currency such as the euro. The recently updated guidelines state that taxpayers must keep a detailed record of their cryptocurrency transactions, including the date of the transaction, the amount of cryptocurrency sold (or exchanged), the Euro equivalent amount, and any fees paid.

Any transaction you’ve made must be submitted not in Bitcoin or Ethereum but in Euros, this process is fairly simple if you have made a few trades between Euros and Bitcoin, but as soon as you start trading between cryptocurrencies or using more than one exchange, you will need to convert all these into a singular currency. This can be a tedious process by hand but can be automated by tax software.

Calculating Crypto Tax

There are two main types of tax applicable to cryptocurrency transactions in Ireland:

Capital Gains Tax

The Irish Tax and Customs office treat the disposal of an asset, including crypto, as a capital gains event. Disposals include:

• Selling crypto for fiat, such as Euros
• Swapping one crypto for another
• Using crypto to pay for goods or services
• Gifting crypto (unless it is to your spouse)
• Selling an NFT for another NFT or cryptocurrency

A flat capital gains tax of 33% applies to crypto. If you are an individual and not a corporation, the first €1,270 of capital gains are exempt. However, this exemption amount includes capital gains and losses in all asset classes, not just crypto. So, you can balance your gains or losses in crypto against the rest of your portfolio.

Calculating your capital gains for crypto is a little trickier than real estate or stocks. If you were trading stocks, you would buy or sell a share for euros. In crypto, you can trade between fiat and crypto and crypto-to-crypto.

For example:

• You purchase 10 units of Bitcoin for a total of €10,000. A month later, you exchanged 1 Bitcoin for 10 Ethereum.
• At the time of the exchange, 10 Ethereum is worth €2,000.
• The capital gain in this transaction can be calculated with the cost base as €1,000 (Purchase price of 1 Bitcoin) and the capital proceeds as €2,000 (Market value of 10 Ethereum at the time of exchange).
• Capital Gain = €2,000 - €1,000 = €1,000

The same would be true when calculating a capital loss as well. The individual crypto-to-crypto trades can be claimed as a capital loss if the value changes adversely in Euro terms.

When calculating capital gains, it is key to calculate the gain/ loss for each trade and then aggregate the gains over the year, fiat to crypto trades are also part of this process.

Income Tax

In Ireland, certain crypto transactions are subject to income tax upon receipt. There is no specific guidance on exactly which crypto transactions are subject to income tax, however, it is highly likely that if you are seen as earning additional income from crypto, then the related transactions will fall under the income tax component of your return. Some possible transactions that may fall into this area include:

• Mining rewards
• Staking rewards (more information below)
• Airdrops
• Liquidity Pool rewards
• Getting paid a salary in crypto
• DeFi activities that earn crypto
• Royalties from selling NFTs

Wrapping crypto

Wrapping crypto is a misunderstood event from a worldwide tax perspective because so few governments have commented on the situation. Technically, transferring BTC to WBTC or ETH to WETH is moving between coins, so Crypto Tax Calculator classifies these transactions as capital gains events as default. However, if you consult a tax professional and deem these are not taxable events in your specific situation, you can use the non-taxable ‘swap’ category.

Mining crypto in Ireland

Crypto mining is a popular way to make extra income. Crypto from mining is subject to income tax for individuals or corporation tax for businesses. The value of the mined crypto is taxed as income, and if the mined crypto is later sold, the proceeds will fall under capital gains tax, with the cost basis being the value at the time it was originally received. You may be able to deduct some mining costs, such as hardware and electricity costs; however, you should discuss with your accountant about your personal situation.

Staking crypto in Ireland

There is currently no specific guidance on staking concerning tax in Ireland. However, it is likely to be treated similarly to mining crypto. This means that the value of staking rewards at the time of receipt will be taxed as income, and if the crypto is later sold, the proceeds will fall under capital gains tax, with the cost base equivalent to the value at the time it was received originally.

NFT taxes in Ireland

There is no specific guidance on NFTs in Ireland regarding taxes. However, as they are digital assets, it is highly likely that they will be treated the same as other cryptocurrencies, such as Bitcoin and Ethereum. This means that proceeds from disposing of an NFT will fall under capital gains tax.

Inventory Method in Ireland

In Ireland, the First In First Out inventory method is used for cryptocurrency. When cryptocurrency is sold, the oldest units purchased are sold first, and the most recent purchases are sold last.

For example, if an investor purchases 1000 units of any cryptocurrency on day 1,2000 units on day 5, and 3000 units on day 7, they will sell the 1000 units first when they decide to cash out.

When calculating their gains or losses, they can use the following formula:

Gain/Loss = (Sale Price - Purchase Price) x (Units Sold/Total Units Purchased)

In this example, if the investor sold 500 units of any cryptocurrency at a sale price of $3, then the gain/loss can be calculated as:

Gain/Loss = ($3 - $2) x (500/6000) = $0.50

The investor would gain $0.50 for each unit of crypto sold.

Filing Crypto Tax Returns

Irish Taxpayers must declare any profits or gains deriving from cryptocurrency transactions when filing their annual income tax return. Furthermore, taxpayers must also include any losses sustained from cryptocurrency transactions in their tax returns.

Taxpayers can use the Revenue online system (ROS) to file their income tax returns online. Taxpayers filing a return for the first time must register with ROS and enter the relevant details relating to their cryptocurrency transactions.

How Crypto Tax Calculator Can Help

Manually maintaining records of all of the above doesn’t sound like much fun, does it? Spoiler: it’s not. That’s where we come in! Our crypto tax calculator software can help you aggregate your crypto transaction data to help calculate any gains, losses, income and/or expenses. As an added bonus, we’ve worked with tax professionals from Ireland to ensure our platform follows your region’s guidelines.

Once you’ve imported all your data to form a complete overview of your trading history, you’ll be prompted to reconcile any outstanding lines. After those are reconciled, you’ll have the option to download reports showing these values clearly. These reports and the information included will give you the amounts needed to complete your yearly tax return for Irish Tax and Customs.