Cryptocurrency is the new age of currency. It’s growing in popularity and with it, so does tax concerns. Canadian investors need to understand the tax implications associated with cryptocurrencies like Bitcoin. Here is everything you need to know about how cryptocurrency is taxed in Canada by the Canada Revenue Agency (CRA).
The bitcoin boom meant that people were ready to plunge into what was earlier seen as risky waters. While some investors may not have known much about cryptocurrencies earlier, they were prepared to learn all about them and invest in them to reap high profits.
So if you have made some income from cryptocurrency investments, then now is the time to know all about declaring them during tax season. Some investors seem to think that hiding cryptocurrency-related profits from the government is the way to go since crypto is not a centralised currency. However, you must declare all the profits you make from crypto transactions.
Hiding the profits you have made from bitcoin or other cryptocurrency-related investments from the Canadian Revenue Agency is a terrible idea that could backfire on your finances.
Some investors have studied as much as they could about crypto trading and share their knowledge with the crypto community online. The number of people interested in the world of digital currencies is only growing.
The cryptocurrency and blockchain community in Canada is significant and even has regular meetups and forums. Many crypto experts have said that it is essential to declare your crypto profits in your tax statements to avoid trouble.
According to the CRA, regular tax rules apply to digital currency transactions, including those made with cryptocurrencies. Using cryptocurrency does not mean Canadian users can get away without paying tax.
Chartered accountant Warren McCann, a partner at Kudlow & McCann Professional Corporation, recently told a leading media organisation that deals with crypto clients this tax season was the talk of the office.
“Two years ago, we didn’t see it at all; now we have multiple clients coming forward indicating they’ve made transactions with cryptocurrency,” McCann was quoted as saying. He added that the crypto users were mostly younger clients.
Canadians are taxed on their worldwide income, which means that when cryptocurrency is exchanged for a profit or gain, it should be declared in Canadian taxation statements, including a personal tax return.
The most important things to remember about cryptocurrency profits and the CRA are:
- Recording keeping – Keeping tracks of all your crypto-trading can make it much easier to declare them when it’s tax season.
- Crypto trading is not seen as an eligible investment under Canadian Income Tax, so it would not be possible to trade crypto in a tax-free account or RRSP.
- Don’t try to hide gains from cryptocurrency trading from the tax authorities. You may have to end up paying a penalty which could build up along with fines for paying late.
Recent changes to Canada’s cryptocurrency regulations are making waves in the industry. The latest tax laws outline how Canadians should be reporting digital currencies on their returns and filing GST/HST.