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Crypto Blog: Coinberry

Crypto Tax Canada: All You Need to Know

Crypto Tax Canada: All You Need to Know

Although cryptocurrency isn't considered a real currency in the eyes of the CRA, it is still considered a commodity. This means that you must report any gains or losses for tax purposes in Canada. 


Crypto is still relatively new, so it can be difficult to know exactly how to deal with the related taxes. This article will discuss all you need to know about Canada crypto taxes, so you won't have to go searching aimlessly for any more answers. 


Keep reading to learn all you need to know about cryptocurrency taxes Canada!

Cryptocurrency Taxes Canada: Business Vs. Capital Gains

There are two ways you can be taxed when it comes to crypto in Canada: 


  1. As a business (business income). 100% of crypto proceeds are taxable if you're operating as a business.


  1. As a hobby (capital gains). If you're trading crypto casually (not in a business manner), 50% of profits are taxable.


It's important to note that the rate of tax you must pay on your crypto profits depends on your province. You should check your province's tax capital gains and business tax rates if you want to know exactly how much you'll be paying.


Whether someone pays crypto tax as a business or a hobby depends on the individual case. 


If you are unsure whether you're operating as a business or not, there are some things to consider. 


Here are some of the main things that indicate your crypto gains should be taxed as business income:


  • Consistent trading. If you trade crypto consistently (i.e., on a daily/weekly basis), this would generally be considered a business activity, and you may be liable for business tax rather than capital gains tax.


  • Business setup. If you have a business setup, such as a building or office specifically for mining crypto, you will likely be liable for business tax. 


  • Plans for profits. If you intend to earn consistent profits over a long period or have any business-like plans that include the expectation of profits, you may be liable for business tax.



If you make one crypto purchase and hold it for months or years, this wouldn't be considered a business activity. Only if you trade consistently and make business plans would your gains be liable for business tax.

Cryptocurrency Taxes Canada: When Do You Need to Pay Tax?

When it comes to cryptocurrency taxes Canada, there are several instances where you'll need to pay taxes on your crypto gains. So, it's essential to know which events are taxable and which aren't. 


Below are some instances where you will need to pay Canada crypto taxes.

1. When You Trade Crypto for Fiat

Trading crypto for fiat currency (for example, trading Bitcoin for Canadian dollars) is a taxable event. You are turning a commodity (crypto) into money and possibly making a profit from it, so you must report it to the CRA and pay Canada Bitcoin tax.


If you're new to crypto and looking for somewhere in Canada to trade, you should consider using Coinberry. You can easily buy, sell, and trade crypto for Canadian dollars on Coinberry, and it's super easy to keep track of all your transactions. 


All the most popular cryptocurrencies, such as Bitcoin, Ethereum, and Litecoin, are available to trade now on Coinberry, and its user-friendly interface makes it perfect for beginners who want to keep track of transactions for tax purposes. 

2. When You Buy Goods and/or Services with Crypto

Paying for goods and/or services with crypto is a taxable event. According to the CRA, any transaction that involves paying for a good or service with crypto is considered a barter transaction. Therefore, you must report it to the CRA. 


When purchasing anything using crypto, the purchase cost is the equivalent of the market value at the time of the sale. 


For example, if you buy a phone for 0.015 Bitcoin, which equates to $840 at the time of purchase, the transaction should be recorded as $840. Any gains you make from a barter transaction, like this phone transaction example, must be reported. Then, you will need to pay any Canada Bitcoin tax that you owe.

3. When You Trade One Cryptocurrency for Another

Trading one cryptocurrency for another is a taxable event. You must record any profits you make from a crypto trade and report it to the CRA.


An example would be if you trade Bitcoin for Ethereum. If you ended up making a profit from this trade, it would be taxable. If you break even or make a loss, you won't have to pay additional taxes.

Holding and Transferring Crypto

You don't have to pay tax on your crypto if you buy it and hold it on an exchange or in a wallet. As long as you don't sell it, you don't have to pay tax on it.


However, you should record the amount you paid for the crypto so that you can work out how much profit or loss you made once you decide to sell it. If you've been holding your crypto and now you choose to sell for a profit, you should only report the gains and pay your Canada crypto taxes after you sell.


If you sell and make a loss, you won't have to pay any tax on it, and you must apply it against your capital gains.


Additionally, it isn't considered a taxable event if you transfer your crypto from one place to another, i.e., from a wallet to a trading platform (like Coinberry). This means you can transfer your crypto between your wallets without worrying about any tax implications. 

How to Calculate Crypto Profit

To calculate crypto profit, you should deduct the selling price from the price you originally bought it for. You should also deduct any fees you incurred from the original buying price. This method is easy as long as you have records of the buying and selling prices.


If you don't track how much you spend when buying/selling your crypto, it will be much more challenging to do your taxes correctly. 


To learn more about Canada crypto taxes, be sure to check out this informative Coinberry help page.

Conclusion

There are many things you should know regarding Canadian crypto taxes before you decide to invest. 


Here are some essential things to remember regarding cryptocurrency taxes Canada:


  • You must pay either capital gains tax or business tax on crypto
  • With capital gains tax, only 50% of profits are taxable 
  • If you trade consistently, you will be liable for business tax
  • Trading and buying goods and services with crypto are all taxable events
  • Holding crypto in an exchange or wallet is not a taxable event

Source:

Mondaq: Canada: Taxation Of Cryptocurrency And Barter Transactions – A Toronto Tax Lawyers Analysis