Ireland Crypto Tax

If you’re a newly-born crypto startup searching for a safe nest to grow your wings, the Irish taxation system is the right choice for you, thanks to its three-year exemption from the Corporation Tax which for new startups can be reduced to 0% if their Corporation Tax due is 40,000 EUR or less in a single tax year. If your crypto business is more mature, Ireland still maintains its appeal due to the low general tax rates and attractive tax incentives.

Taxes in Ireland are administered by the Revenue Commissioners. The tax year runs from the 1st of January to the 31st of December.

Irish companies can manage their taxes (file tax returns, make payments, claim repayments and more) online via the Revenue Online Service (ROS). Once you are registered with ROS (or have MyAccount), you can use eRegistration online service to register your company as a taxpayer. Only companies with Irish-resident directors can avail of this service.

A company’s residency status impacts its tax treatment. A company is a tax resident in Ireland if it’s incorporated there, unless it’s already considered a tax resident in a country which Ireland has a double taxation agreement with. If a company is incorporated elsewhere but is centrally managed and controlled in Ireland, it’s also considered an Irish tax resident.

Ireland has over 70 international agreements on the elimination of double taxation which cover Capital Gains Tax, Corporation Tax, Universal Social Charge and Income Tax.

There’s no crypto-specific tax or rules in Ireland, however registered Virtual Asset Service Providers (VASPs) are obligated to follow general Irish taxation principles and pay the following general taxes:

• Corporation Tax (CT) – 12,5%
• Capital Gains Tax (CGT) – 33%
• Universal Social Charge (USC) – 0,5%-11%
• Value Added Tax (VAT) – 23%
• Stamp Duty (SD) – 7,5%
• Withholding Tax (WHT) – 25%

The following business activities may trigger tax liabilities in Ireland:

• Exchange between virtual assets and fiat money
• Exchange between one or more types of virtual assets
• Transfer of virtual assets (conduct of a transaction on behalf of another person that moves a virtual asset from one virtual asset address or account to another)
• Provision of custodian wallets
• Participation in, and provision of, financial services related to an issuer’s offer or sale of a virtual asset or both

However, since virtual assets, or crypto assets, aren’t properly defined and classified, each case is considered individually by looking at the relevant facts and circumstances. In the end, the tax treatment of crypto-related transactions depends on the nature of business activities and on the involved parties.

Corporation Tax

As a rule, all companies engaged in activities related to cryptography are obliged to pay a tax on corporations. Irish tax residents pay corporate tax on their profits worldwide (income and capital gains), while non-residents trading through Irish-based subsidiaries or agencies must pay income tax to these Irish locations, and a certain income earned in Ireland.

The declarations are completed and all taxes due are paid up to the 23rd of the ninth month, beginning at the end of the reporting period. It includes the calculation and payment of the preliminary tax, completion of the CT1 and 46G forms, as well as the payment of any remaining tax. Late payment would result in the payment of interest at the daily rate of 0.0219 per cent.

Companies that accept payments for products or services in cryptocurrencies continue to follow the same principles of revenue recognition and profit calculation. In addition, they are responsible for recording cryptocurrency transactions for tax reporting purposes. Company profits and losses related to cryptographic transactions should be included in their accounts and general corporate tax rules should apply.

Companies engaged in crypto-related activities can prepare their accounts in currencies other than the euro, provided that it is their functional currency. However, cryptocurrencies are not considered functional currencies, so accounts for tax purposes cannot be prepared in cryptocurrencies.

CAPITAL GAINS TAX

Capital gains tax is levied on the sale of assets, including the sale and transfer of virtual assets. The taxable amount, or profit collected, is the difference between sales proceeds and the value of cryptographic assets. Each realization of each asset must be calculated separately. Refund of capital gains tax must be filed by October 31 per year after the sale date.

Irish resident tax companies are taxed on their income worldwide, while non-residents are required to pay a tax on the disposition of virtual assets used for business activities in Ireland.

In the case of capital losses related to investments in assets, they can normally be deducted from the recognized gains in the same or future periods. If the loss exceeds the profit, the remainder of the loss may be carried forward to be used as an increase to be recognized in the future. It is not possible to compensate capital losses with corporate income or to reject capital losses within the tax group.

Tax liabilities on taxable income from assets are generally included in the corporate tax of the company. This means that the profit collected will be calculated at the corporate tax rate and included in the form CT1. Because of the difference between corporate and capital gains, capital gains need to be adjusted.

The adjusted increase is calculated as follows:

• Calculate the amount of the capital gains tax at the rate of the capital gains tax
• Divide this amount by corporate tax rate

VALUE ADDED TAX

Since the Court of Justice of the European Union (CJEU) ruled out that such cryptocurrencies as bitcoin are treated as fiat currencies for VAT purposes, cryptocurrencies are exempt from VAT in Ireland.

In addition, financial services related to the exchange of cryptocurrencies for fiat currencies and vice versa are not subject to VAT in accordance with paragraph 6(1)(d) of the 2010 VAT consolidation law if the company acting as an exchange service provider acts as principal (i. e. acts as the owner of the virtual assets sold).

If providers of regular products and services are paid in cryptocurrencies, they must follow the usual rules when paying VAT. The taxable amount is expressed in euros of the value of the cryptocurrencies at the time of delivery.

Income derived from cryptocurrency mining activities generally goes beyond VAT on the basis that the activity is not an economic activity for VAT purposes.

TAX INCENTIVES

Crypto companies can take advantage of such incentives as 25% credit for certain R&D expenditures, reduced IP tax rates and discounts on energy efficient equipment.

The tax credit extends to the entire amount paid by the company for R&D qualifications and is in addition to the normal deduction of 12.5% available for R&D, resulting in a total tax credit of 37.5%.

Irish companies acquiring intellectual property are exempt from stamp duty and have the right to deduct capital costs of acquiring certain intellectual property (patents, copyrights, trademarks, licenses, software, etc.) are used for economic activities.

Finally, it must be remembered that companies offering cryptographic products or services are also required to keep records of all transactions involving virtual assets for tax purposes. If the records are stored in a cryptographic wallet or safe on a device such as a laptop or mobile phone, they must be handed over to the Tax Commission at their request. These records must be kept for six years in accordance with the law.

How do I pay taxes on crypto in Ireland in 2024?

In 2024 Ireland, the taxation of cryptocurrency gains remains an important and relevant topic for cryptocurrency investors and users. Irish tax law requires taxpayers to declare cryptocurrency income and pay the relevant taxes. In this article, we look at the key aspects of the process of paying tax on cryptocurrency income in Ireland for 2024.

Determining the tax status of cryptocurrencies

Cryptocurrencies are not recognised as legal tender in Ireland, however they are considered assets or property for tax purposes. This means that income from cryptocurrency transactions, including capital gains and mining income, is taxable.

Capital Gains Tax (CGT)

One of the main types of tax applicable to cryptocurrency gains is capital gains tax (CGT). The CGT rate in Ireland for 2024 is 33% of the capital gains realised on the sale of cryptocurrency. The capital gain is calculated as the difference between the sale price of the asset and its original acquisition cost, taking into account possible allowable expenses.

Income from mining and steaking

Income from mining or steaking cryptocurrencies in Ireland is generally subject to personal income tax at rates ranging from 20% to 40%, depending on the taxpayer’s total annual income. These incomes must be declared as “employment income” on the annual tax return.

Tax liabilities and declarations

Taxpayers must calculate their own tax liability and file a tax return for the relevant tax period. In Ireland, the tax year coincides with the calendar year and the deadline for filing returns and paying taxes is usually 31 October of the following year.

Accounting and documentation

For tax accounting purposes, it is critical to keep an accurate record of all cryptocurrency transactions, including transaction dates, volumes, purchase and sale prices, and calculations of capital gains or losses. This data will help in calculating tax liabilities and will be necessary in the event of a tax audit.

Important considerations

• Record Retention Periods: Irish tax law requires that all documents and records relating to tax liabilities be retained for six years after the end of the tax year in which the return was filed.
• Losses and Deductions: Losses from cryptocurrency transactions can be carried forward to future years to be deducted from future capital gains.
• International taxation: For persons involved in cross-border transactions or with tax liabilities in other jurisdictions, it is important to consider possible double taxation and apply international tax treaties.

Conclusion

Paying tax on cryptocurrency gains in Ireland requires careful planning and record keeping. Given the complexity of tax legislation and the rapidly changing nature of the cryptocurrency market, taxpayers may benefit from seeking professional tax advice. This approach will help ensure that all tax obligations are met and the tax burden is optimised.

 

Table with the main tax rates in Ireland for 2024. This table includes personal income tax, corporation tax, VAT, and capital gains tax rates that apply to cryptocurrency income.

It is important to note that there are various tax credits and deductions available for individuals that can reduce the overall tax burden.

If you’re preparing to register and run a crypto company in Ireland, our highly experienced and insightful team of Regulated United Europe (RUE) is here to support you. We offer comprehensive advice on crypto taxation, cryptocurrency regulation in Ireland, crypto company formation and obtaining a crypto license in Ireland. Moreover, we’ll be more than happy to step in if you’re in need of accounting services. Rest assured, we guarantee efficiency, confidentiality as well as meticulous attention to every detail that impacts your business success. Contact us now to book a personalised consultation.

Also, lawyers from Regulated United Europe provide legal support for crypto projects and help with adaptation to MICA regulations.