June 6, 2018

CRA’s Take on BITCOIN

There has been a long talk about the BitCoin  – Is it for real? Is it going to stay for long? Is it going to replace the existing currencies? Is it stable?

Well for the purpose of this blog we are going to look at only one question and that is –  What is the viewpoint of CRA ( Canada Revenue Agency) on BITCOIN and how is it aiming on taxing any income derived through this new era of currency exchange ? (in this blog Bitcoin means all kinds of Crypto Currencies available in the market)

For starters CRA has stated that “BitCoin will be treated as a Commodity/Security and will be taxable”. So what this statement means is BitCoin will be treated as any other investment you have in stocks/shares etc. If that is the case there could be following situations where a BitCoin can trigger a taxable transaction:

• Investment – If you have invested in BitCoin then you will be required to report the gain/loss on sale of the BitCoin as Capital Gain/Loss on Schedule 3 (only 50% of the profit is taxable). You would take the sale price and reduce it with the purchase price less any outlays/expenses for buying or selling the BitCoin.
• Trading – If you are doing Day Trading in BitCoin, meaning you are actively involved in buying and selling of BitCoin then it would be considered as business income and will be reported as such, hence 100% of the profits will be taxable.
• Mining – If you are  mining and selling the BitCoin, it will be considered a business and 100% of the net profits are taxable.
• Accepting BitCoin as a mode of Payment – If you are selling your goods/services for an exchange with Bitcoin then it will have the same treatment as barter transactions, where FMV(fair market value) of product or service is reported as income. So in case of Bitcoin the fair market value of bitcoin will be considered for the purposes of reporting taxable income to CRA. FMV for  BitCoin seems to be fairly easy to find as it is traded online.

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