Canadian Revenue Agency demands bitcoin disclosure on tax returns

The Canadian Revenue Agency (CRA) wants to know about anyone who has used Bitcoin to purchase items in the real world, or if they have used it to purchase traditional currency such as USD or CAD.

In December, when the price of Bitcoin was hovering around US$20,000, a Bank of Canada governor warned Canadians about the risks and tax implications involved with cryptocurrency.

Stephen Poloz explains that "Characteristics vary widely but, generally speaking, they can be thought of as securities. The Canada Revenue Agency agrees that […] if you buy and sell them at a profit, you have income that needs [to] be reported for tax purposes."

Experts don’t believe it’s as straightforward as that.

"There is no exact framework within the income tax act that tells us exactly how Bitcoin is taxable," said Lana Paton, managing partner of PwC Canada's Tax Services."

In 2013, the CRA issued a statement that defined Bitcoin and its contemporaries as non-legal tender. It instead classified cryptocurrency as a commodity to result in taxable gains or losses.

The gains or losses are realized once you purchase something with crypto, or sell it for traditional currency. If they simply float around in the digital network going unused, they remain untaxable.

“For example, if you purchased one bitcoin for US$10,000 but sold it last year for $19,000, you will need to declare $9,000 in capital gains.”

Goods or services purchased through crypto are also subject to GST or HST, therefore requiring disclosure. The Bank of Canada recommends all crypto users keep track of their transactions during the tax year.

“For example, if you bought Bitcoin for US$1 — a price the cryptocurrency hasn't held since 2011 — and used that Bitcoin to buy a new car last year for roughly US$18,700, you would have to declare a capital gain of $18,699.”

Cryptocurrency miners also have to report their mining as income and employment.

For more, see the original Huffpost article here.