The Cryptocurrency Gold Rush
The year is 1849 and the hills of California are heaving with gold so you pack up your wagons drive across the country and start swinging an axe. To live the ‘California Dream’ of the 21st Century now all you need is access to the internet and some starting capital. As a result of the ease at which people can partake we now have millions of investors in the Cryptocurrency exchanges from professional traders the ‘Whales’ to speculative punters that don’t want to miss out on the next big Blockchain explosion. Bitcoin FOMO is real!
Like all sectors there’s an ocean of jargon and ‘techspeak’ to navigate and the range and variety of currencies and platforms can be overwhelming however with a small bit of leg work you’ll soon know the difference between BitCoin, Etherium, LiteCoin, Ripple & Cardano.
The key element for any investor or prospective investor to understand is the infrastructure underpinning the whole economy Blockchain. There are blogs, dummies guides to, YouTube vids and articles explaining in varying degrees of detail however the key points to understand are:
- What is it: Decentralized public ledger of data
- Each data ‘block’ has a timestamp, a link to a previous block and unique data
- Cryptography ensures that users can only edit the parts of the blockchain that they “own” by possessing the private keys necessary to write to the file.
- Blockchain technology has been described as the internet of value. Blockchain is a method by which value can be transferred securely where both parties have access to the blockchain file and the encryption keys.
What does all this mean for the Taxman?
If you have investments in Cryptocurrencies then you are exposed to Capital Gains Tax (CGT). This is treated the same as any other investment. You must return a CG1 if you are a PAYE Employee or if you are self employed it is included on your Annual Form 11 return.
What do you pay?
- 33% On Profits (Disposal proceeds – costs including costs of purchase, fees to brokers/solicitors)
- If you are making a profit through the disposal (selling, gifting or *exchanging your asset) of your cryptocurrency, you will need to declare it to Revenue for Capital Gains Tax (CGT).
- *Exchanging your asset includes transferring gains from one currency into another. i.e. Transferring a gain in Bitcoin into Ripple crystallizes the gain in Bitcoin and must be declared to Revenue.
- The first €1,270 of your cumulative annual gains (after deducting expenses and losses from other cryptocurrency investments) are exempt from tax
When do you pay?
- There are two disposal period in the year Jan-Nov & Decemeber.
- If you make a disposal between 1 January and 30 November you must pay CGT by 15 December of the same year.
- If you make a disposal between 1 – 31 December, you will have to pay your CGT by 31 January of the following year.
- How do you pay?
Contact John or Darren to set up a meeting to discuss how to be compliant with you Cryptocurrency profits.