2018 Update – Revenue published the following guidance earlier this year.
Please note: I’m not a financial expert, ut would have covered many of these topics in my business degree related to shares and derivitives. To try and make site as relevant as possible for Irish readers, a few weeks ago I was doing a search for the tax status of bitcoin. As nothing is formally announced so far, but interestingly with Denmark ruling bitcoin trades tax free “as it’s not money” back in March, I thought I’d research what’s the case in Kildare Street. So digging down through the general bitcoin, mt. gox and other bitcoin news which has made the headlines in broadsheets here in Ireland, I came across this following on. A member of the public had sent a letter to the Minister of Finance and posted his reply online.
The main thing for small scale bitcoiners is good news: “The first EURO 1,270 of an individual’s net gains for a year (that is gains minus current year losses and losses brought forward from earlier years), is exempt from CGT with the balance taxed at a standard rate of 33%.”
Read the full post below for some very interesting reading.
Posted on 27th March 2014 by dcross (click link for the comments)
Dear Minister Noonan,
You may or may not be aware of the recent news surrounding digital currencies, the most popular of which is currently Bitcoin. Bitcoin is a decentralised independent cryptographic currency which facilitates immediate global transfer of value for little to no fees and has also proven itself as a store of value in a similar fashion as gold. Bitcoin is frequently termed “The currency of the internet”. It’s most probably that these types of digital currencies will continue to grow in popularity due to the frictionless, fee saving benefits that they provide end users. An entire technology based industry has been created to facilitate Bitcoin services including escrow companies, Bitcoin banks, trading exchanges and betting sites for example but by all accounts it’s still very early days for digital currencies. The daily transactional volume of Bitcoin has recently surpassed that of Western Union (a financial remittance company) and at time of writing has a “narrow stock of money” which exceeds that of Croatia, Latvia and Malta to name a few.
The purpose of this email is a request for formal clarification from the state regarding the capital gains tax procedure that holders of these digital currencies may be liable for. Currently any profit on the disposal of an asset above EURO 1270 is liable for tax at a rate of 33%. The early investors of these currencies who are based in Ireland may see themselves limited by this in the scope of benefits that their foresight now affords them. Many of these people are the type of individual who have deep technical understanding and can spot trends before they happen; the inventors, innovators and creators of products and business. If this money is reinvested in tech startups instead of going to the tax coffers would bring great potential benefits to Ireland. If Ireland can demonstrate that it is friendly for Bitcoin businesses we can ensure that the benefits are not lost to other rival countries and similarly it would invite entrepreneurs here from countries where they may be mired with restrictions. If the regulatory framework is too prohibitive then digital currency startup companies will simply move to other more accepting nations.
I think that there should be no penalty tax for individuals who exchange Bitcoin to Euro in Ireland to encourage digital currency innovation here.
With digital currencies Ireland has an opportunity to distinguish itself as a leader when it comes to fostering new technology business and I would urge you to consider the matter. If you would like to discuss this topic or have any general questions about Bitcoin feel free to give me a call, my number is below.
His office replied back with:
An Roinn Airgeadais Oifig an Aire Department of Finance Office of the Minister Sráid Mhuirfean Uacht, Telephone: 353-1-676 7571 Baile Átha Cliath 2, Facsimile: 353-1-676 1951 Éire. LoCall: 1890 66 10 10 VPN: 8109 Upper Merrion Street, http://www.irlgov.ie/finance Dublin 2, Ireland.
Our Ref: 13/5859/MF
27 March 2014
The Minister for Finance, Mr Michael Noonan TD, has asked me to thank you for your correspondence regarding Capital Gains Tax (CGT) and Bitcoin. The delayed reply is regretted.
CGT is chargeable on gains made on the disposal of assets. Section 532(b) Taxes Consolidation Act 1997 states that any currency other than the currency of the State is an asset for CGT purposes. Where a person acquires any foreign currency i.e. other than Euro, he/she has acquired an asset for CGT purposes. If that person subsequently converts that foreign currency into Euro or into another foreign currency that would constitute a disposal of an asset for CGT purposes.
Crypto-currencies, such as Bitcoin, are not legal tender in the Euro area. E-commerce, including the use of virtual currencies, presents a challenge to tax administrations throughout the world. The Revenue Commissioners and tax administrations in other countries are actively monitoring developments. From the information provided, it is not clear how Bitcoin would be treated for CGT purposes.
However, it is likely that gains accruing from speculation on Bitcoin would be liable for CGT in the normal way.
Persons are chargeable to CGT on such gains for a year depending on their residence and domicile.
The first EURO 1,270 of an individual’s net gains for a year (that is gains minus current year losses and losses brought forward from earlier years), is exempt from CGT with the balance taxed at a standard rate of 33%.
As regards reinvesting the proceeds of disposals of Bitcoin in tech startups,
a capital gains tax relief for entrepreneurs who reinvest the proceeds from the disposal of assets made on or after 1 January 2010 in certain chargeable business assets was announced by the Minister in Budget 2014.
The necessary legislation governing this relief is included in Section 45 of Finance (No 2) Act of 2013. Commencement of the legislative provisions is subject to EU state-aid approval. The purpose of the incentive is to encourage entrepreneurial activity by encouraging individuals who have disposed of assets in recent years to re-invest the proceeds into new productive business activities.
Subject to EU approval, the relief will apply from 1 January 2014 to individual entrepreneurs:
· – who have made disposals of assets since 1 January 2010 on which they have paid capital gains tax;
· – who invest at least EURO 10,000, in the period from 1 January 2014 to 31 December 2018, in acquiring chargeable business assets that will be used in a new business and
· – who subsequently (after a minimum period of 3 years) dispose of those chargeable business assets at a gain giving rise to a capital gains tax liability.
The relief will be given on the tax due on any chargeable gain arising on the subsequent disposal of the chargeable assets after a minimum period of 3 years and will amount to the lower of:
Ø the full amount of capital gains tax paid on the initial disposal made since 1 January 2010, or
Ø 50% of the CGT payable on the disposal of the new chargeable business assets.
If an entrepreneur reinvests the proceeds of that subsequent disposal in a further new business in the 2014-2018 period, the relief can also apply on a subsequent disposal of the chargeable business assets of that further new business. Where less than the full proceeds of a disposal on which capital gains tax has been paid are reinvested, only that proportion of the capital gains tax relative to the amount reinvested will qualify for relief.
The relief will be given in the form of a tax credit equal to the lower of the capital gains tax paid on the disposal of assets made on or after 1 January 2010 or 50% of the capital gains tax on any gain from the future disposal of the chargeable business assets.
The Minister hopes this information is of asistance.