Unpaid Capital Gains on Crypto

I'm in the very unfortunate position of having not paid CGT on crypto trades dating back to 2021. A small group of mates and I used to invest in crypto and it was common knowledge to us that you pay CGT when you cash out.

Ive recently found out that for some absurd reason, tax is due on every transaction. I have about 12,000 euro worth of crypto to my name at the moment and I estimate I may owe up to 30,000 in taxes over the past few years, which is crazy as I definitely do not have this money to pay and won't even have it after a year of saving.

I have no idea what to do. Do I just close my accounts and avoid crypto forever, pray that I don't get audited? Do I move country? Should I just try and pay?

edge95 said:

I'm in the very unfortunate position of having not paid CGT on crypto trades dating back to 2021.

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Or, alternatively, you're in the very fortunate position of having made gains on which you are liable for some tax?

edge95 said:

pray that I don't get audited?

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If you have unpaid and overdue CGT liabilities then you need to deal with these as a matter of urgency. No sensible person here is going to advise you to engage in tax evasion or to stick your head in the sand and hope that this just goes away.

If in doubt get independent professional tax advice on how to assess your outstanding liabilities and approach Revenue in order to discharge them.

OP, unless you have either
1. cashed out a substantial amount along the way and spent it, or
2. suffered big drops in value since making all your gains,

then it wouldn't be mathematically possible for you to owe CGT that is a multiple of the value of your holdings.

Have you maybe used 33% of the total value of your crypto, rather than 33% of the gain in value, in your estimates?

edge95 said:

I have about 12,000 euro worth of crypto to my name at the moment and I estimate I may owe up to 30,000 in taxes over the past few years,

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How can the CGT bill be greater than the value of the asset?

edge95 said:

I have no idea what to do

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Sell sufficient crypto to cover previous CGT liabilities as well as the CGT on this sale.

As previously said, if you owe 30k in CGT, you must have made about 100k in profit. If you only have 12k of crypto now, you have either spent the profits (you still owe the CGT) or made significant losses. If you have made losses, you can offset these against profits. CGT due on each transaction, not when you cash out. You need to get on top of this quickly as you may start accruing interst and penalties in additon to what you owe.
As a first step, get statements of transactions from your service providers.

Upload your transactions to koinly.io to verify the amount of tax owed.

torblednam said:

2. suffered big drops in value since making all your gains,

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Say 2020 - made big gains giving rise to €30k CGT - but didn't pay it.

2021 - bought €100k of Crypto which is now worth €12k.
Loss for CGT purposes €88k

But can't backdate losses against gains, so tax is due?

Brendan

People I've known who invested in crypto were pulling their tax advice from the same forums telling them which crypto to invest in. I'd be surprised if even 1% of the people involved in crypto, at that time at least, were tax compliant regarding crypto.

I was confidently told several times by crypto supporters that as long as they don't convert it to cash there's no tax due and converting from one crypto to another crypto was tax free. Otherwise intelligent people also telling you that it wouldn't be CGT it'd be income tax. At best wishful thinking.

People would make a profit in one type of cryptocoin and then try to lock it in by converting it to another cryptocoin - maybe a "stable" coin - in their view avoiding a tax event.Then the plan would be in several years to convert their fortune to a real currency and only then either pay tax or ideally have moved tax residence to somewhere like Portugal and avoid any tax.

I can't imagine Revenue will allow previous years gains to be cancelled by later years losses - that seems unworkable and would encourage people to never pay CGT.

ashambles said:

I can't imagine Revenue will allow previous years gains to be cancelled by later years losses

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No need to imagine. They simply don't.

Carry forward capital losses​

You will be able to carry forward the losses. This means that you can use them against the next available capital gains you may make in later years. You need to include the carried forward loss in your calculation of CGT for later years. You also enter the carried forward loss on the CGT return for later years.

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Brendan Burgess said:

Say 2020 - made big gains giving rise to €30k CGT - but didn't pay it.

2021 - bought €100k of Crypto which is now worth €12k.
Loss for CGT purposes €88k

But can't backdate losses against gains, so tax is due?

Brendan

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Yes that's what I was envisaging and while certainly possible, I feel like it might be unlikely - we'll only find out if the OP enlightens is!

Hillwalker123 said:

As previously said, if you owe 30k in CGT, you must have made about 100k in profit. If you only have 12k of crypto now, you have either spent the profits (you still owe the CGT) or made significant losses. If you have made losses, you can offset these against profits. CGT due on each transaction, not when you cash out. You need to get on top of this quickly as you may start accruing interst and penalties in additon to what you owe.
As a first step, get statements of transactions from your service providers.

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I should clarify, as per Brendan, you can use past losses against future profits wrt CGT (and carry forward any unused), not the other way around