Cryptocurrency Taxation in Canada

Taxation is the buzzing word that echoes in every trader’s mind. Some want to know how to cash out crypto without paying taxes. Canada, for instance, has a fair share in the crypto world, with a large base of traders and some well-known exchanges headquartered there, such as Bitbuy or Coinsmart.

This article will help you discern between taxable and nontaxable activities in the crypto world and, hopefully, give you valuable information before you start crypto trading in Canada. If you are running a small business and considering implementing crypto options, articles about cryptocurrency payments or how to accept cryptocurrencies are a great place to start.

Background

With the crypto market money circulation catching up to the fiat market in recent years, every country needs to adapt to the current and future times, and legally define the scope and limits of imposing taxes on traders from that country.

In Canada, in particular, this was a debated topic in the Senate in 2014, after which taxation on cryptocurrency was defined and the Canadian Revenue Agency took action to help the people understand the cryptocurrency taxation rules. There are guides for this available on the Canadian government’s official website.

Short Answer

First, we must point this out: Crypto IS taxable in Canada. You are obliged to meet every requirement and pay for any trading action that is listed. However, this does not apply to everything you do in the crypto world. Some actions and transactions are not taxable and are completely free of any responsibility to CRA.

Non-Taxable Crypto Activities

You won’t be subjected to taxation for holding cryptocurrencies. This makes sense, as making a potential profit this way is not due to any business transaction but the movements of the market itself.

Also, when you buy crypto with fiat currency, or when you move crypto between different cryptowallets, you will not be taxed.

Finally, the only possible way of receiving nontaxable crypto funds is if someone sends them to you as a gift. Trading is not an option.

If you are running a small business, you can keep reading this article and cross-check to see what will be taxable for you.

Cryptocurrency Taxes In Canada

Business Income or Capital Gains

Before getting into the matter, it is important to note that Canada recognizes a general difference between money gained as a business income and money gained as capital gains. If your profit is recognized as business income, all of it is subjected to taxation, while for capital gains, only 50% is taxable.

Getting into explanations for every nook and cranny of every possible crypto action is impossible for our purpose, so make sure to always get informed before making any particular move. TradeCrypto is a great resource of up-to-date crypto information. They often intertwine in case of crypto investments and are not easily discernable.

Here are some basic characteristics of a business income. If the criteria are not satisfied, it is likely you will be taxed for capital gains only:

1. A visible product or service that is being promoted
2. Clear intent to make a profit
3. Existence of businesslike activities, such as business plans or assets and inventory
4. Commercial activity

Which Crypto Actions are Taxable?

A general rule of thumb is that when there is a disposition of crypto — taxation applies. Disposition encompasses any movement of the funds, such as selling, trading or exchanging them.

Here is a list of activities that are always taxable by definition:

1. Selling a cryptocurrency on the market, or giving it to someone (note the difference — receiving is not taxable).
2. Any trading or exchanging process in which a cryptocurrency is invested in any way, or exchanged for another cryptocurrency.
3. Changing from crypto to a fiat currency (remember — the other way around is nontaxable).
4. Using your crypto to buy a product or a service constitutes a taxable event, and all your crypto wins and crypto losses are subject to taxes.

FAQ

Do I need to report crypto that I hold for taxes in Canada?

No, holding does not meet the CRA criteria for taxation, as long as you do not dispose of it in any trading action.

Can CRA track your crypto funds?

Yes, as a citizen of Canada, your information is shared with CRA for legal purposes on most if not all exchanges.

Is crypto mining taxable in Canada?

Yes, and depending on your perceived intentions, you will be taxed for capital gain or business income.

Bitcoin is falling; Is there any recent good news for the crypto community?

Yes, there are hundreds of new possibilities opening. For example, Google’s cloud service has announced a major partnership with Coinbase, and an implementation of crypto payments for its cloud service.

Author Bio

Sviat Pinchuk
Crypto Journalist (COO)
Man who simply bought some BTC for domestic needs in 2014 and then forgot about it till 2017.
The dude who got Etherium in 2017 by misclick and sold it in 2018 “just to try”.
Lost 1 Florida house in XEM in 2018, Sviatoslav finally decided to trade reasonably and now he is one of the most analytical and data-driven trader in Crypto Industry.
Has Bachelor Degree of Chinese Interpreter and deep practical experience in competitive niches SEO.

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