Cryptocurrency (CC) has come a long way since Bitcoin started in 2009. Canada does not consider CC to be a currency, however, from a tax perspective it is considered a commodity and both commodity and barter rules do apply.
As a commodity, when CC are bought and subsequently sold, the resulting gain or loss must be reported for tax as a capital gain or loss. In addition, gains and losses are triggered even when trading between CC.
If CC is being held outside of Canada and the total cost (either by itself or along with other foreign property) is more than $100,000 it must be reported on form T1135 Foreign Income Verification Statement. Failure to file a T1135 is subject to a penalty of up to $12,000 per year if CRA determines gross negligence.
If a business accepts CC for goods/services or pays vendors for goods/services, these transactions fall under CRA’s rules for barter transactions and must be recorded at their regular value. GST/HST is also applicable to registrants for business income and expenses. It is recommended that clear documentation be kept for all barter transactions.
CRA has the ability to track many CC transactions by Canadians. By not reporting these transactions, you run the risk of incurring CRA penalties and interest in the future.
