Whether you have bitcoins or another digital currency, in Canada, cryptocurrency is considered to be an asset or property, not currency.
Cryptocurrency is increasingly being used for purchasing goods and services and for speculation or longer-term investment purposes.
Despite the many rumours that cryptocurrency transactions are not taxable, the Canada Revenue Agency (CRA) has been very clear on this matter and there is every reason to believe that it will be actively targeting such transactions in the coming years.
Cryptocurrency taxation according to the CRA
The CRA’s first official pronouncement on bitcoins was on December 23, 2013 and stated that the CRA does not consider digital currency as money issued by a central bank or country, such as the U.S. dollar for example. In the CRA’s opinion, cryptocurrency should be considered property for purposes of the Income Tax Act (ITA).
When goods or services are exchanged for merchandise (cryptocurrency), the value of the goods or services must be included in income. Depending on the nature of the transaction, taxpayers who dispose of cryptocurrency in exchange for goods or services may have to tax themselves on the appreciation in value of the cryptocurrency.
For example, a taxpayer who purchased a bitcoin for $1 and subsequently exchanged it for accounting services valued at $100 will have to self-assess tax on a gain of $99.
Similarly, an individual who transacts cryptocurrency and speculates on its value will have to pay tax depending on the nature of the transaction (i.e., business income or capital gain).
Determining the nature of transactions is important as this will have a direct impact on income taxes. The full amount of a gain on a “business income” type transaction will be taxed, whereas only 50% of the gain on a “capital” type transaction is taxed.
Similar measures apply in the case of a loss. The full amount of a loss on a “business income” type transaction can be applied against any type of income (e.g., employment income). On the other hand, only one half of a “capital” loss may be deducted, and it may only be applied against a capital gain.
Cryptocurrency is an asset
Like the United States, Australia and the Netherlands, the CRA has decided to consider cryptocurrency an asset or property rather than currency. Other countries, like Germany and Singapore have decided to consider it a currency like any other.
The CRA might decide to become more flexible in the future to adapt to new market realities. However, there is no indication that this could happen any time soon.
Why should I tax myself? The CRA won’t know…
The Canadian tax regime is based on the principle of self-assessment. As a tax resident of Canada, you are legally required to determine your amount of tax payable and to file an income tax return.
In our work as cryptocurrency tax specialists, we regularly come across individuals and businesses that don’t believe the CRA could be interested in them and prefer not to self-assess on that income. We believe that the opposite is true since the facts show without a doubt that the CRA is very interested in this new technology.
We strongly recommend that you report your cryptocurrency; otherwise, you could find yourself in the CRA’S crosshairs. Additionally, the CRA can go back as far as possible in the case of a voluntary failure to report income.
Our experts at Raymond Chabot Grant Thornton and Catallaxy are available to answer your questions and help you choose the best options.
This article was written in collaboration with Marc-Antoine Laurin.
22 Feb 2019 | Written by :
Stéphane Lauzon is a tax expert at Raymond Chabot Grant Thornton. Contact him today!
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Adviser alert – February 2019
The Grant Thornton International IFRS team has published Insights into IFRS 16 – Sale and leaseback accounting.
The latest bulletin Insights into IFRS 16 provides guidance on the accounting for sale and leaseback transactions.
IFRS 16 makes significant changes to accounting for sale and leaseback transactions.
A sale and leaseback transaction is a popular way for entities to secure long-term financing from substantial property, plant and equipment assets such as land and buildings.
It is a transaction where an entity (the sellerlessee) transfers an asset to another entity (the buyer-lessor) for consideration and leases that asset back from the buyer-lessor.
As IFRS 16 has withdrawn the concepts of operating leases and finance leases from lessee accounting, the accounting requirements that the seller-lessee must apply to a sale and leaseback transaction are more straightforward.
Download this bulletin which explains the new concepts and provides a simplified example of the requirements.
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Adviser Alert – February 2019
The Grant Thornton International IFRS team has published Insights into IFRS 16 – Transition choices.
The Insights into IFRS 16 series provides insights on applying IFRS 16 Leases in key areas.
Each edition will focus on an area of IFRS 16 to assist you in preparing for the required changes on adoption of the standard.
The bulletin Insights into IFRS 16 – Transition choices provides guidance on the transition to IFRS 16.
Download the document below.
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It’s to a municipality’s benefit to mobilize its resources to undertake projects that best meet the needs and expectations of its citizens.
Managing priorities in a municipal context can be complicated. Municipalities are now recognized as the government of proximity with a role that goes beyond managing infrastructure and urban planning to encompass increased economic, social and cultural development and safeguarding and developing natural spaces. Additionally, they must often deal with an increasing number of stakeholders with diverse expectations.
With a wide range of potential activities and limited financial manoeuvrability, elected officials must regularly decide between projects that are equally important but difficult to compare. How can they approach this process?
Strategic directions: the basis for effective management
Strategic directions are the result of a structured, or strategic, four-step planning process:
1. Analyze the internal and external environment
The first step consists in analyzing the organization’s strengths and weaknesses and the external environment’s opportunities and threats. These analyses will reveal uncover the major issues facing the municipality in the coming years.
2. Consult citizens
The elected officials will then have the requisite information to consult citizens about their concerns and vision of the municipality’s future. These consultations must be mobilizing and serve as a catalyst to define a common vision.
3. Adopt a clear vision
The vision adopted by the elected officials and citizens must be a powerful tool to mobilize and direct the organization towards long-term objectives.
4. Define strategic directions
These will be the starting point for determining priorities.
Strategic directions guide the short- and medium-term deployment of actions to address the issues, establish major projects and communicate the municipal council’s priority intentions. They channel municipal action towards activities that will be the municipality’s focus in the next three to five years.
Relying on clear strategic directions is particularly important when considering their positive impact on organizational performance. Because they align the long-term vision with the implementation of strategies and operational plans, they ensure consistency between the municipal council’s wishes and organizational capacity and the various components of the municipality’s activities.
The municipality plays a very pivotal role during the budget process when the municipal council must decide among the various projects presented to it. Strategic directions then serve as a framework for the annual resource allocation decisions.
11 Feb 2019 | Written by :
Pierre Fortin is a partner at Raymond Chabot Grant Thornton. He is your expert in Management...
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