Although the popularity around Bitcoin and other cryptocurrencies is new and governments are notoriously slow, don’t let that lull you into thinking that the Tax Man isn’t savvy. He wants his pound of flesh from crypto, too.
However, despite cryptocurrencies not being new, the hows of reporting and remittance remain a little foggy.
That said, there is some guidance offered by the CRA (Canada Revenue Agency).
(Looking for info from the IRA for USA citizens? Check out this article.)
If You Sold Crypto
The CRA views cryptocurrencies as a form of property. Any sales of cryptocurrencies, therefore, will incur taxes on the difference between the buy and sell price.
Sold at a loss? You can report that, too.
If You Bought or Sold Goods or Services with Crypto
Because the CRA views crypto as property versus currency, any transactions involving crypto is viewed as a barter transaction and is subject to the government’s rules around barter trades.
This means that, not only are capital gains taxes a possibility, but there may even be a requirement to collect GST/HST!
Of course, this might just be the CRA doing some CYA. Plus, there may be legal arguments against the CRA’s view of cryptocurrencies.
If You Traded Crypto
This is one of the places where things can get pretty funky.
The CRA views trading crypto as 2 separate transactions: a sale and a purchase.
For example, if you trade Bitcoin for Ethereum, you are basically selling BTC at current market price (subject to capital gains taxes or losses, as the case may be) then you are purchasing ETH at current market price.
While I haven’t yet searched for them myself, I’ve heard tell of the existence of tools that will pull data from various exchanges and put together a clean(ish) picture of gain/losses and attendant tax obligations. If you have done any decent amount of trading, using a tool like this might be a good idea.
If You Mined Crypto
From what I’ve gathered, if you’re mining crypto as a hobby, you should be clear. I certainly hope so, because my Monero mining venture has netted me a whopping 0.35 XMR so far (presently worth about $105 CAD or $84USD)!
However, if you’re mining crypto as a business venture, what you mine is taxable. Of course, ITCs and other standard business deductions apply, so make sure to take that into account when reporting.
As for how to value what you’ve mined, I haven’t found a good answer to that. Do you report based on the value at the time the crypto was mined? At tax reporting time? At the time you withdrew from a mining pool? I don’t know.
If You Were Paid in Crypto
Like all other situations, this is also taxable. This is the same whether you’re an employee or an independent contractor.
How To Stay in the Clear
Regardless of whether or not you use a tool to help pull everything together, your best bet is to find a CA/CPA and/or a lawyer/law firm who understands cryptocurrencies and the related tax implications.
At the end of the day, cryptocurrency-related gains and losses are taxable events that need to be reported. Unless you want to engage in tax evasion and commit a crime, that is.
(Image courtesy Wikipedia.)
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