Irish-based companies are not permitted to prepare their accounts in cryptocurrencies such as bitcoin and must convert crypto payments to staff into euro for tax purposes. A new Revenue Commissioners briefing document also makes clear that while trading in cryptocurrencies such as bitcoin, litecoin and ripple will not attract VAT, any gains made will be subject to capital gains tax.
Trading in crypto currencies continues to grow in popularity as investors look to benefit from extreme volatility; on Thursday, bitcoin was trading at about $8,300, down from its 2017 highs of almost $20,000.
In its briefing, Revenue said that while companies are entitled to prepare their accounts in a currency other than euro, they are not entitled to do so in crypto.
“Accounts, for tax purposes, cannot be prepared in cryptocurrencies: euro or functional currency accounts must be prepared,” Revenue stated.
And when it comes to making a gain on a cryptocurrency, the Revenue guidance states that individuals will be subject to capital gains tax at a rate of 33 per cent on gains, while losses will be allowable against offsetting CGT bills. For companies, chargeable gains will be subject to corporation tax.
On VAT, Revenue says that as bitcoin and other crypto currencies are deemed to be “negotiable instruments”, they are exempt from VAT. This means that those engaged in exchanging cryptocurrencies won’t be subject to VAT.
People engaged in mining crypto, whereby complex maths problems are solved in order to create new crypto coins and reward those solving the problem, are also exempt from paying VAT on any income received, as this “activity does not constitute an economic activity for VAT purposes” Revenue stated.
In cases where employees are paid in bitcoin, the amount must be converted to euro at the time of the payment so that income tax can be calculated.
“Returns to Revenue must be shown in euro amounts and remittances made appropriately,” the brief stated.
Revenue also concedes that valuing cryptos can be challenging, as there is not always a single “exchange rate” for cryptocurrencies. As such, Revenue said that a “reasonable effort” should be made to use an appropriate valuation for the transaction in question.