Irish Revenue Commissioners Issue Guidance Manual on the Taxation of Cryptocurrencies

The Irish Revenue Commissioners issued a new Tax and Duty Manual (Tax Manual) on 24 May 2018 which provides guidance on the taxation of cryptocurrencies and applies to all persons holding, trading or accepting cryptocurrencies.

The Tax Manual confirms that cryptocurrency-related transactions will be subject to direct taxation such as corporation tax, income tax and capital gains tax. However, as with all economic activity, the particular nature of the transaction in question, as well as the parties involved, will determine the tax treatment of cryptocurrency-based transactions.

The Tax Manual has not introduced a specific tax regime for the crypto sector and taxable profits are to be calculated in accordance with existing tax law. Suppliers of goods and services in exchange for cryptocurrency will be required to maintain a record of such transactions. The Tax Manual also includes a detailed description on the treatment of VAT and confirms that VAT is due as normal for crypto-based transactions.

According to the Tax Manual, cryptocurrencies will not be deemed to be “functional currency”, as defined under the Taxes Consolidation Act 1997, for the purposes of preparing financial statements and alternative currency should therefore be used for reporting. Whilst the Tax Manual acknowledges that there is no single exchange rate for cryptocurrencies, it is expected that reasonable effort should be made in obtaining the appropriate valuation of crypto-based transactions.

The new guidelines set out in the Tax Manual have been praised for eliminating much of the uncertainty surrounding cryptocurrencies and have been heralded as a significant step towards the integration of cryptocurrencies into mainstream business.