Do You Have to Pay Tax on Bitcoin?

How to Pay Tax on Your Bitcoin

The short answer to this is yes, you’re required to pay taxes on bitcoin in Ireland.

One common misbelief amongst crypto holders is that this industry is largely unregulated. And as such, there’s no way of tracking those who don’t pay tax. But this couldn’t be further from the truth.

The Revenue Commissioners of Ireland or as it’s often shortened to, Revenue, has a way of tracking your bitcoin transaction. This means they can access your whole transaction background.

Just recently, the HMRC in the UK notified three major cryptocurrencies that they need to hand over details relating to their users. Revenue may decide to do the same, and there’s nothing anyone can do to stop them.

The lowdown on crypto investments taxation in Ireland

To understand why you should pay tax on bitcoin, you should first get acquainted with how the tax authority defines crypto. To them, bitcoin and any other digital currency is an investment similar to shares and stocks.

This implies that crypto holders are required to pay taxes based on whether they earn profits or incur losses. If your crypto event turns out to be profitable- whether that entails a sale, exchange or gifting the crypto to someone- you’re required to pay a capital gains tax amounting to 33%.

The deadline for filing your tax forms is usually at the end of October. However, if you prefer to file online, then you have until mid-November to file.

How to pay capital gains tax (CGT) on bitcoin in Ireland

The amount and deadline for paying your CGT will depend on whether you’re self-employed or a pay-as-you-earn (PAYE) worker.

For the self-employed, the correct tax form to fill in is Form 11, whereas PAYE individuals file CG1 Returns.

If you happen to dispose of your bitcoin asset anytime between 1st of January and 30th November, then the law requires you to pay your CGT by mid-December of the same year.

However, if you make your disposal within the month of December, your CGT payments ought to be complete by 31st January the next year.

You’re probably wondering whether you’re required to present any documents of your bitcoin transactions when filing your returns. Well, the tax authority mandates you to provide comprehensive details, specifically:

  • A description of the asset (in this case bitcoin)
  • Acquisition cost (which is the amount of money you spent to acquire bitcoin)
  • Sales’ proceeds

How does Revenue treat losses on crypto?

As with any investment, there’s always a possibility that you’ll incur a loss when you put your money into bitcoin.

In fact, the crypto industry is highly volatile so you should always prepare yourself for either situation. If you make a loss, you’re still required to file your tax return, that is, a form 11 for a self-employed person and CG1 form for the PAYE individual.

On a more positive note, you can use that loss to offset any gains you make. Let’s say you’ve invested in two cryptos: Bitcoin and Dogecoin.

If you incur a loss from Bitcoin but earn profits in Dogecoin, then you’re free to use the loss to offset the capital gain you make via Dogecoin. Better yet, you can use the losses to offset capital gains that you make in the future.

The Bottom Line

The Revenue Commissioners of Ireland requires you to pay taxes on Bitcoin and other cryptocurrencies that you’ve invested in.

Since it treats crypto as a form of investment, you should always remember to report bitcoin transactions in your tax form.

To be specific, such investments attract a 33% capital gain tax. The deadline for making this payment depends on when the transaction happened.

If the disposal was made between January and 30th November, then the deadline is set on 15th December. If it, however, took place between 1st and 30th December, then you have until 31st January of the following year to pay your taxes.