Background

With the growing number and use of cryptocurrencies (Bitcoin, Ethereum, Lightcoin, Ripple etc.) Revenue issued ac manual in May 2018, setting out the tax implications.

Business accepting cryptocurrencies

For business which accept payment for goods or services in cryptocurrencies there is no change to when revenue is recognised or how taxable profits are calculated. No special rules apply.

Income Tax

The profits and losses of a non-incorporated business on cryptocurrency transactions must be reflected in their accounts and will be taxable on normal income tax rules.

Corporation Tax

The profits and losses of a company entering into transactions involving cryptocurrency would be reflected in accounts and taxable under normal CT rules. As cryptocurrencies are not a functional currency (as defined), company accounts cannot be prepared in cryptocurrencies.

Capital Gains Tax

If a profit or loss on a currency contract is not within trading profits, it would normally be taxable as a chargeable gain or allowable loss for CGT purposes.

VAT

Cryptocurrencies are regarded for VAT purposes as “negotiable instruments” and exempt from VAT. Financial services consisting of the exchange of bitcoins for traditional currency are generally exempt from VAT Income received from cryptocurrency mining activities will generally be outside the scope of VAT. VAT is due in the normal way from suppliers of any goods or services sold in exchange for bitcoin or other similar cryptocurrencies. The taxable amount for VAT purposes will be the Euro value of the cryptocurrency at the time of the supply.

PAYE treatment – salary paid in cryptocurrency

Where wages/salaries are paid using cryptocurrency, the value of the emolument for the purposes of calculating payroll taxes is the Euro amount attaching to the cryptocurrency at the payment date.

Valuation of Cryptocurrencies

The value of cryptocurrencies may vary as between different exchanges. Therefore there may be more than one exchange rate. A reasonable effort should be made to use an appropriate valuation for the transaction in question.

What questions do you have?

We are happy to help. Please post your comment below or contact Gerry Higgins, Tax Partner on 01 677 9000 or by email: ghiggins@cooneycarey.ie.

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