Revenue update to manual covering the taxation of crypto-asset transactions

On 27 April, Irish Revenue published an update to its tax and duty manual covering the taxation of crypto-asset transactions. This was the first update to this manual in two years.

A number of new sections have been included in the manual, and this insight looks at the main updates and what those updates mean for corporate and individual crypto-asset holders. 

No special rules for crypto-asset transactions

The updated manual again reiterates that in Irish Revenue's view, no special tax rules should apply for crypto-asset transactions. This position is then reflected throughout the guidance, in applying general tax principles and rules to various aspects of crypto-asset acquisition, ownership and disposal.

Guidance on trading in crypto-assets for individuals

The updated manual notes that the question of whether a trade of dealing in crypto-assets is taking place or has taken place, will ultimately be a question of fact and that a transaction or transactions involving crypto-assets being generally described as "a trade", is not sufficient evidence of trading.

The updated manual notes that in Revenue's view, carrying on a trade in crypto-assets would be similar in nature to carrying on a trade in shares, securities, or other assets. They note that a taxpayer should consult Revenue guidance on such trading activities, when making a decision about whether their activity of buying and selling crypto-assets is trading. Consistent with Revenue's view that no special tax rules should apply for crypto-asset transactions, a taxpayer should apply general trading principles (including those stemming from case law) and also consider published Revenue guidance, when determining if their activities amount to a trade in crypto-assets.

Tax treatment of acquisition by employee of crypto-assets or crypto-asset options

The updated manual notes that where crypto-assets are provided to an employee or director free of charge or for a reduced amount, normal benefit-in-kind rules will apply.

It is also notes that where an employee or director is given a right or option to acquire assets by their employer, which may include crypto-assets, Irish Revenue's view is that the Irish tax treatment of such options should be similar to the tax treatment of the right or option to acquire share options (including in respect of the tax and reporting obligations for both the employee and the employer).

This is consistent with the relevant Irish domestic legislation (section 128 of the Taxes Consolidation Act 1997), which already defines a "right" very broadly in this context (being a right to acquire any asset or assets including shares in any company). As such, the tax treatment outlined in the updated Revenue manual is again reflecting the position already contained in domestic legislation.

Record keeping and crypto-assets

It is noted that the general record keeping provisions also apply to crypto-asset transactions. The guidance notes that where records are stored in a wallet or vault on a device such as a personal computer, mobile phone or similar device, these records, when requested, must be made available to Revenue. Such records must be kept for six years and it is noted that the provisions apply to all taxpayers, including PAYE only taxpayers.

The manual doesn't address whether transaction records/information being contained on a blockchain would in Irish Revenue's view, constitute sufficient record keeping for crypto-asset transactions.

Remittance basis of taxation and assets "on the cloud"

Irish Revenue has also included a section relating to the remittance basis of taxation and the interaction of this tax treatment with crypto-assets. In short, where a non-Irish domiciled, but tax resident individual is in receipt of foreign income or gains, they are only taxable on that income or gains in Ireland, where the income or gains is brought into Ireland.

Of particular note, is that Revenue state that where a crypto-asset exists "on the cloud", it cannot be viewed as being situated outside of Ireland. They go on to note that: (i) where the situs of the crypto-asset is in dispute, the onus is on the taxpayer to prove where the gain accrued and (ii) where the location of the crypto-asset giving rise to a taxable gain cannot be confirmed by the taxpayer, that gain is chargeable to tax in Ireland based on residency rules.

As such, the guidance suggests that non-domiciled individuals will need to consider the Irish tax implications, where they dispose of a crypto-asset and the location of that asset cannot readily be identified as being outside of Ireland.

For more information on this, please contact Stephen Egan or any member of A&L Goodbody's Tax team.

Date published: 12 May 2022