Capital Gains Tax on sale of portion of crypto holdings

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99thFloor

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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?
 
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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
 
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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.
 
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