Bitcoin is a relatively new e-currency payment system that is not operated by a centralized government authority like most other currencies. Popular for online payments and transfers due to its built-in encryption and security methods, Bitcoin has captured the attention of many non-traditionalists and tech-minded people.
Digital / Cryptocurrency Tax Consultant in Toronto
It has also captured the attention of the Canada Revenue Agency, who has altered existing tax codes to help address profits and transactions associated with virtual currencies. Under this portion of the tax code, you must declare any income received or expenses made, regardless of whether any actual cash was tied to the transaction. For example, if you run a daycare and you accept eggs, bitcoins or any other type of trade in exchange for child care, you still are required to report these transactions on your income taxes. However, if you use Bitcoin or other virtual currency systems in the operation of your business or self-employment activities, you are still responsible for claiming these purchases and payments as usual on your tax return.
For example, if you purchased inventory for your shop with Bitcoin and the cost was three bitcoins, you need to find the exchange rate for the day the purchase was made. Similarly, if you paid an employee using Bitcoin, you would have to convert the payment to Canadian dollars using the exchange rate from the day the payment was made.
What is a Bitcoin?
As the Government of Canada does not yet accept Bitcoin or other cryptocurrencies as payment — contrary to what some recent telemarketing scams would have you believe —GST remitters would need to make an equivalent Canadian dollar remittance on any cryptocurrency transactions attracting GST to the extent not offset by input tax credits. The GST consequences to those disposing of crypto are currently uncertain, and it is anticipated that the CRA will provide their administrative views on that topic in the near future.
The cryptocurrency world is replete with vagaries and uncertainties. Investors and traders face a veritable tax minefield in undertaking digital currency transactions. Suffering a theft or loss of crypto may result in the doubly-punitive outcome of economic loss coupled with tax penalization.
Taxing Virtual Money: The Bitcoin and the CRA
Each of those, and many others, are nuanced issues in a fluid and ever-evolving industry. Professional tax advice is always strongly recommended. Increasing scrutiny from all types of regulators, including tax authorities, seems inevitable for the crypto sector. While this may diminish some of the potential profits when compared to the early boom days of crypto, it will likely add structure, transparency and legitimacy over the long term.
Industry participants are well served to stay up to date on developments, as the CRA addresses the topics discussed above and others.
Bitcoin & Cryptocurrency Taxation in Canada
As Ben Franklin said, however, they should not expect the government to fail to ask for its share of any profits. EKB is a full-service law firm dedicated to providing businesses with legal services that are both practical and creative. Located in Vancouver, EKB has experience advising financial institutions and fintech businesses operating in Canada and internationally. Cryptocurrencies FinTech Regulatory Updates. Fraser Hartley.
Internet Anonymity: A False Hope? Mining can be Taxing Crypto-miners potentially face a markedly different tax treatment than passive investors. Unsettled Issues The cryptocurrency world is replete with vagaries and uncertainties.
- Capital gains tax on crypto;
- stocks dealing with bitcoin.
- Crypto Exchange Coinsquare Ordered to Hand Thousands of Customers’ Records to Canadian Tax Agency;
- bitcoin di luar negeri.
The Future is Regulated Increasing scrutiny from all types of regulators, including tax authorities, seems inevitable for the crypto sector. About the Authors. Kelly Samuels and Russell Allsup. Kelly Samuels.
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