Capital Gains Tax on sale of portion of crypto holdings

Edited to correct CAT to CGT -Brendan



There seems to be no guidance on capital gains tax liabilities on crypto sales beyond the basic - "it is treated the same as any other investment/asset".

I understand that proceeds minus costs minus annual CGT exemption = amount taxable at 33%. But that assumes you acquired 1 indivisible asset and are selling 100% of it.

I can't find any explanation for what the liability would be in a case where you are selling only a portion of holdings acquired in several different purchases, all in different crypto amounts, and all at different prices per crypto.

Let's say the total value is 100K and you paid 10K in total for it, but in several purchases of different amounts.

You want to get a return of 10K to get your outlay back. If you sell a portion for 10K does that mean there is 0 CGT, but any further disposal in the future will be taxed at 33%?

OR, do you have to assign a fraction of the total cost to the amount being sold? If that is the case, how would you calculate it?

It's CGT, not CAT.

And Part Disposal rules apply.

Professional advice is recommended if the sums you are dealing with are materially significant.

.

I am not an expert, but I have always calculated the gains on my shares on first in first out.

Say the following for simplicity

first purchase Bought 10 BTC for €100 = €10 each.
Second purchase Bought 20 BTC for €1,000 = €50 each

Sold 5 BTC for €100,000

The cost of these will be 5 @ €10 each or €50

What Brendan said — the general rule is first in, first out ("FIFO")

To extend his example, if you had sold 15 BTC rather than 5, you would be treated as having sold the 10 BTC that you bought for €10 each, plus 5 of the BTC that you bought for €50 each, giving you a total acquisition cost of (10 x €10) + (5 x €50) = €350.

Subtract that from your disposal proceeds, subtract the annual €1,270 (if this is your first disposal for the year) and the result is your chargeable gain.

(If you buy and then sell the the same asset within a 4-week period, a LIFO rule applies rather than a FIFO rule — i.e. you're treated as selling the asset that you just bought. But that's not the usual case.)

I would have to disagree that the FIFO rule is used for Crypto trades

My understanding is that the only reference to FIFO in Revenue documentation relates to the sale of shares
FIFO is a special treatment that applies to shares

Cryptocurrency is not shares AFAIK
It is very similar to shares in that each individual unit is the exact same as another individual unit of that specific currency, but they are not shares

The Revenue guidance states "Therefore, no special tax rules for crypto-asset transactions are required"

So although FIFO workings would be far simpler in terms of calculations and indeed record keeping, IMO the Part Disposal rules apply here, as indicated by T McGibney above

DB74 said:

My understanding is that the only reference to FIFO in Revenue documentation relates to the sale of shares
FIFO is a special treatment that applies to shares

Click to expand...

The Revenue documentation refers to "marketable shares and securities", not just shares.

As far as I am aware Crypto is not classed a security as it is not traded in markets that are regulated by a Central Bank

I'm open to correction here but that is my understanding

Thanks, all.

In the meantime I rang Revenue, and they didn't really answer my question about how to calculate the cost of a portion, simply heard the words "capital gains" and said I would need to submit a CG1 which would explain everything. Having looked at the CG1, and also at the Part Disposal Rules link, I think I need to get professional assistance.

99thFloor said:

I think I need to get professional assistance.

Click to expand...

I don't really think that a routine matter like this should require professional assistance.

People buy and sell crypto every day.

Revenue should issue clear guidelines on what rules apply.

I suspect that it won't matter much which approach you use. And it should matter less in the long-term.

So pick one to use and make a note of it on your return.

Is there a "Crypto Society of Ireland"? If so, they should pay for professional advice and then send it to their members.

Or one of the Crypto Exchanges should do it.

Brendan Burgess said:

I don't really think that a routine matter like this should require professional assistance.

Click to expand...

That depends on the significance of the sums involved Brendan.

If someone has a gain of €100,000 on a crypto sale, and paying north of €30,000 tax on foot of that, it's crucial to apply whatever tax treatment is appropriate.

That becomes less important if the gain is a small fraction of that.

Just wondering - is the cost of very specific advice like this something that can be offset against the tax payable?

DB74 said:

As far as I am aware Crypto is not classed a security as it is not traded in markets that are regulated by a Central Bank

I'm open to correction here but that is my understanding

Click to expand...

"Security" is not exhaustively defined in the CGT legislation, but it's certainly not limited to to quoted or traded securities. Under Taxes Consolidation Act 1997 s. 585 "security" includes (but is not limited to) loan stock issued by any government, public authority or company. Many of these are not listed or quoted anywhere.

In general usage in the world of finance, any tradeable financial asset is a security; I think there's a good argument that that would extend to cryptocurrency.

But it doesn't matter. The FIFO rule is applied by TCA s. 580, and it expressly applies to

• shares
• securities
• "any assets . . . where the assets are of a nature to be dealt in without identifying the particular assets disposed of or acquired" (s. 580(4))

Even if cryptocoins are not "securities", they are certainly assets that are dealt with without identifying the particular assets disposed of or acquired. All currency is of that nature — if I lend you a fiver I expect €5 back tomorrow, but I don't expect the same fiver — and cryptocurrency is too. So the FIFO rule does apply to crypto.

(Which is what you would expect. Why wouldn't it apply to crypto? The reasons why it makes sense to apply it to shares and securities apply equally in relation to crypto.)

kickstart said:

Just wondering - is the cost of very specific advice like this something that can be offset against the tax payable?

Click to expand...

No. The CGT regime is pretty restrictive about what can be claimed as an expense of acquisition or disposal.

If you were carrying on a trade of dealing in crypto and your profits of that trade were being subjected to income tax, I think the cost of advice on your tax obligations arising in connection with the trade would be deductible.