General Rules of Cryptocurrency Taxation

Cryptocurrency is relatively new and it is important that you know the basics of how it is taxed before getting involved. Here are some general rules you need to know it you are interested in dealing with cryptocurrency:

CRA generally treats cryptocurrency like a commodity. Income earned from transactions involving cryptocurrency is generally treated as business income or as a capital gain, depending on the situation. Note that if earnings qualify as a business income or as a capital gain, any losses will then be treated as business losses or capital losses.

You have to establish if a cryptocurrency transaction results in income or capital as it determines how the revenue will be treated for income tax purposes.

If you pay for goods or services using cryptocurrency, the CRA will treat it as a barter transaction.

You must use a reasonable method to determine the value of a cryptocurrency transaction where a direct value is unknown. Ensure that you keep records showing how you came up with the value. Generally, the CRA's position is that the fair market value is the highest price, expressed in dollars that a willing buyer and a willing seller would agree to.

If you have more than one type of cryptocurrency in a digital wallet, each type of cryptocurrency is considered to be a separate digital asset and must be valued separately.

Remember, just like any other transaction, ensure that you have a plan and that you know what the tax consequences are before getting involved with cryptocurrency.

If you have been using cryptocurrency, KD Professional can help you ensure that you are properly dealing with the tax consequences and will not be audited by the CRA!  We also offer Crypto Currency consulting services through one of our accountants who is a crypto currency expert.

 Our cryptocurrency taxation experts are here to guide you! Contact us today for more information!