Financial Education

Do you have to pay taxes on cryptocurrency in Canada?

Whether you want to start investing in digital coins or already invest in them, it is essential to know if you have to pay taxes on cryptocurrency in Canada and report them. Today, we will explain it all to you!

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by Aline Augusto

Published on 03/29/2022

Taxes on crypto: do you have to report and pay for it?

Check out if you have to pay taxes on cryptocurrency in Canada! Source: Pexels.
Check out if you have to pay taxes on cryptocurrency in Canada! Source: Pexels.

The deadline for tax returns is fast approaching. If you invest in cryptocurrency in Canada, you should be aware of whether you need to pay taxes or not.

Since cryptocurrencies investments are quite new, most Canadians have doubts about taxation. 

So, today we will explain to you the cases when you must report taxes on crypto to CRA – Canada Revenue Agency – and the circumstances you don’t need to do it.

It’s essential to know everything about it to avoid overestimating profits and forget about taxes, resulting in more losses than earnings in general.

Therefore, keep reading to understand it all!

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Do you have to report Crypto on taxes in Canada?

To cut it short, the answer to this question is yes! But, there are some specifications that guide whether you need to pay taxes or not.

Generally, digital coins and tokens are commodities for the Income Tax Act purposes. Therefore, transactions can be treated as capital gain or business income depending on the nature and circumstances.

If you just buy or hold your crypto, you don’t have to worry about taxation.

On the other hand, if you sell, trade, exchange, convert, cash out, or gift, you must report to Canada Revenue Agency.

Converting crypto includes doing it to fiat currency. Plus, trading digital coins includes exchanges, swaps, and peer-to-peer trades.

Firstly, to be counted as a business income, your activity needs to be considered commercial or done in a business way, or even with the intention to make a profit. Also, if a product or service is promoted, your activity will be considered a business income.

In addition, mining operations are considered business income, as well.   

However, if you don’t fit in those cases, but you make a profit from selling your coins, the cryptocurrency activity will be considered as a capital gain.

The difference between those two circumstances is how much you will be taxed. As a business income, your profit will be 100% taxable. But, as capital gain, this reduces to 50%.  

Furthermore, keep in mind that each province has its own rates for income tax. So, search for it on the Canadian government website, on the CRA webpage.

Finally, my suggestion is always to keep your transactions tracked and recorded, so you avoid surprises. Also, you must know that any failure in reporting gains and losses from those transactions is illegal. 

In case of any further doubt, another suggestion: consult a specialist or licensed professional in the area to help you out with your IR. 

Guide for cryptocurrency taxes in Canada: how it works

Learn more about taxes on cryptocurrency in Canada. Source: Unsplash.
Learn more about taxes on cryptocurrency in Canada. Source: Unsplash.

As we have already told you before, the CRA considers cryptocurrencies commodities. Also, when you use it to pay for services and goods, CRA considers it a barter transaction for income tax issues.

Furthermore, you need to use fair market value through a reasonable method.

And whatever method you use, you must use it consistently.

Moreover, each digital coin you hold must be valued separated.

Now, take a look at the guide for cryptocurrency taxes in Canada.

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Track and record your transactions

The first thing you should do now you are aware that cryptocurrencies are taxable in Canada is to keep tracking and recording all your transactions.

But, as you are also aware, blockchain records all. So, at least one thing is less tricky when it comes to crypto taxation. 

Even though you have the records in most cases, if you are a miner in this digital universe, you must keep your receipts.

Define if your crypto is taxable

Check out how cryptocurrency taxes work. Source: Unsplash.
Check out how cryptocurrency taxes work. Source: Unsplash.

The only situation cryptocurrency is not taxable is when you buy or hold it. In any other case, you should declare and report it to CRA.

So, if you sell, trade, exchange, convert, cash out, or gift, you must report to Canada Revenue Agency.

Furthermore, consult a licensed professional to help you out with that!

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Check out if it is capital gain or business income

After defining whether your crypto investment is taxable or not, it is time for you to check out if your earnings will be considered as capital gain or business income.

In the first case, your profit will be 50% taxable. On the other hand, if your investments fit in the second case, the profit will be 100% taxable.

Once again, to be considered as business income, your activity must be commercial or done in a business way, or even with the intention to make a profit. Plus, your activity will also be considered a business income if a product or service is promoted.

Otherwise, your activity will fit in the capital gain option.

In addition, the rate also depends on the province you live in. Therefore, it is crucial that you have a licensed consultant to help you with your IR if you are a cryptocurrency investor.

After that, declare and report at the Canada Revenue Agency forms. Remember that any failure in reporting gains and losses from digital assets transactions is illegal. 

Although these crypto, NFT, and tokens universes are decentralized and most transactions are anonymous; you need to keep in mind that most exchanges provide information to tax authorities.

And if you want tips on how to create your crypto wallet, check out our content below!

Woman holding crypto coins

How to create a crypto wallet: guide for starters

Do you want to use cryptocurrencies but don't know how to begin? Learn how to create a crypto wallet in a few simple steps!

About the author

Aline Augusto

My name is Aline Mesquita; I'm a writer here on the blog, where I write about finance in general and other subjects. I have been working with content creation for ten years. Also, I'm post-graduated in Project Management, with expertise in SEO practices. Currently, I am studying finance, market trends, and cryptocurrencies.

Reviewed by

Aline Barbosa

Senior Editor

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