This section was produced by the editorial department. The client was not given the opportunity to put restrictions on the content or review it prior to publication. February 1, Last Updated February 1, The CRA issued a letter in that stated that Bitcoin and other digital currencies were not considered to be legal tender.
Instead, the government agency said, cryptocurrencies are viewed as a commodity. As such, any resulting gains or losses could be taxable income.
But until the gains on that virtual currency are realized — whether that is by selling the do you pay taxes on bitcoin in canada currency, or using it to make a purchase —those gains are not subject to tax.
When cryptocurrencies are used to pay for goods or services, the rules for barter transactions apply. For example, if a merchant accepted Bitcoin in exchange for a desk, a pair of glasses or jewelry — all items that can currently be bought using Bitcoin — the seller will need to include the fair market value of the good or service sold in their income for do you pay taxes on bitcoin in canada purposes.
When making a purchase, any gains or losses on the cryptocurrency are considered realized and must be reported, said Paton. That gain, whether it is thousands of dollars or a couple of loonies, is subject to tax, said Paton. And avid users of Bitcoin should calculate this amount for all transactions during the tax year, she added.
As well, if someone used Bitcoin to purchase another cryptocurrency, such as Ethereum, he or she would be considered to have sold the Bitcoin for its value in Canadian dollars at the time of the transaction, said Elgar. If you are cryptocurrency mining — using powerful computers to process complex online cryptocurrency transactions in exchange for more cryptocurrency — that has tax implications as well. The cryptocurrency gained in this process will need to be reported as income, said Paton.
However, these businesses will also be able to deduct associated expenses such as the cost of computers and electricity. The flurry of Canadian companies that entered the cryptocurrency mining fray last year will be subject to these guidelines. It may seem early to start thinking about filing taxes, but this year's return could be particularly time-consuming for Canadians who have flocked to Bitcoin and other cryptocurrencies.
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