Bitcoin Transactions are Taxable in Canada
April 30th is the deadline to file your personal income tax return in Canada. If you haven’t filed your taxes yet (and aren’t self-employed), you might want to get that taken care of but should take note of the latest tax edict from Canada Revenue Agency.
In response to an inquiry by the Canadian Broadcasting Corporation about it, the CRA has said that just because Bitcoin purchases and sales are done online doesn’t mean that they are exempt from tax. The use of bitcoins are considered taxable by Canada’s tax authority.
I don’t quite understand bitcoins so I’m not going to give my opinion on the tax rulings or Bitcoin itself. These tax treatments can, of course, change in the future as precedents are set.
When talking to the CBC, the CRA said, “When bitcoins are bought or sold like a commodity, any resulting gains or losses could be income or capital for the taxpayer depending on the specific facts.”
The specific facts are likely (though this is just speculation based on what I know of the Canadian Income Tax Act) whether you are a professional trader (that is your main source of income) or if you don’t regularly trade them and treat them as investments. For example, if you are a casual investor, sale of your investments would be treated as capital gains/losses and half of the value of the gain is taxable. If your job is trading investments (i.e. you’re a day trader), you are taxed on the whole gain.
If you use bitcoins to buy goods and services, the CRA considers that a barter transaction and the transaction would be taxable under those rules. Since barter transactions are exceedingly rare, I couldn’t tell you what the tax rules are. Hell, I bet your accountant would have to dig into the Income Tax Act to figure that one out.
If you trade in bitcoins, you should disclose this to your accountant or income tax preparer so it’s handled correctly and the CRA doesn’t bring the hammer down on you.