Holders of cryptocurrencies such as bitcoin are soon to come under greater tax scrutiny for the profits they make on the digital assets.
Revenue has confirmed it is “updating and expanding” its guidance on the treatment of cryptocurrencies to reduce tax evasion amid a global regulatory clampdown.
It is understood officials are looking at telling intermediaries – such as exchanges and brokers – to report details of crypto trades, which would make it harder for investors to shield their returns from taxation. Currently, Revenue relies entirely on self-reporting by individuals.
Revenue is also looking at resolving questions regarding income and gains on crypto by non-domiciled individuals, as well as ways to tax crypto assets held outside Ireland by Irish residents.
The new guidance is due to be released in the “short term”, according to a Revenue spokesperson, and will address the tax obligations for individuals and businesses that buy and sell crypto.
The current three-page guidance document was published in April 2020, before crypto assets had become widely held in Ireland, and addresses complicated issues such as capital gains tax on crypto disposals at a very general level.
The Revenue updates follow recent moves against crypto assets by the Central Bank of Ireland, which said on Tuesday it was banning Irish-regulated investment funds from holding cryptocurrency on behalf of retail clients.
Central Bank governor Gabriel Makhlouf has long been a vocal critic of crypto investing, likening it to the notorious Dutch tulip mania in the 17th century, which wiped out the savings of thousands of people.
Financial regulators and tax agencies around the world are scrambling to catch up with the evolution of the once-obscure digital assets, which have been heavily promoted by corporate leaders such as Tesla CEO Elon Musk and even Hollywood stars such as Matt Damon.
Wild swings in the value of bitcoin have brought cryptocurrencies to mainstream attention, both for the evident risks of investing in a volatile asset and for the potentially large rewards available over short time frames.
As trading in cryptocurrencies spreads beyond enthusiasts and professional investors to retail savers and young people using popular e-money apps like Revolut, the urgency for authorities to act has grown.
The EU is in the process of drafting a new directive that would bring crypto assets under the same kind of regulatory rules as other financial instruments.
Notes on the draft document, which has been in process since early last year, point out the many challenges facing tax authorities trying to keep track of crypto gains, such as pseudo-anonymity, valuation difficulties, the hybrid payment/investment characteristics of the assets and the rapid evolution of the underlying technology.
The directive would also allow regulators and tax agencies to share data across borders, making it harder to conceal transactions.