Is cryptocurrency taxable in Canada?
Wondering how cryptocurrency is taxed in Canada? You aren’t alone. Over the years, forensic accountant Robert Watterson has encountered hundreds of people who don’t know how it works either.
Cryptocurrency investors have basically been left to figure it out on their own and there aren’t a lot of resources out there to guide them. Even most accountants can’t help.
“There’s not a lot of experience in the (accounting) industry that can deal with something that is so new and dealt with by the government in such an obscure way,” says Watterson, also the managing director of Hubkoin, the best crypto platform in Canada.
“If you were involved in (cryptocurrency), and you thought it was a really nice hobby, now you’re looking at your crypto account and realizing you’ve got $400,000… (You’re probably asking yourself:) ‘Is the government going to want to know something about that? What do I do now?’”
The Canada Revenue Agency doesn’t treat crypto the same way it treats securities or stock. Since cryptocurrency isn’t considered legal tender, it’s a commodity in the Income Tax Act.
This means that after selling or mining cryptocurrency Canadian taxpayers are subject to capital gains or business income tax. Similarly, losses can also be treated as business losses or capital losses.
If you’re in the business of trading or investing, you’ll be taxed on your income or profits.
If you’re just an ordinary taxpayer using cryptocurrency as an investment you will have to track gains and losses on transactions as you would on capital property and report these on your income tax return
Confused yet? Hang on, it gets worse. If you use your cryptocurrency to make a purchase, it’s considered part of the barter system and you need to calculate gains and losses.
“When everything is based on the barter system, it’s very similar, but completely different on the income tax side,” says Watterson.
How do I avoid paying taxes on cryptocurrency in Canada?
Put simply, you can’t. Even though crypto transactions are technically conducted anonymously, the CRA can — at least in theory — access customer info from exchanges and use this data to figure out how much income should be reported.
Whether you’re new to the world of cryptocurrency or just want to learn as you buy, sell and trade, Hubkoin is the place to go. The proudly Canadian digital currency exchange puts a strong focus on education and helping you make sense of the often complicated world of cryptocurrency.