I don’t ever intend to pay any tax. I’ve never heard of this though. Through all my research you are taxed on 50% of your gains. I don’t sell mine, so I never paid much attention to it.
Even trading one crypto for another can be taxed if you made gains and the CRA does Cryptocurrency audits now.
Guide for cryptocurrency users and tax professionals - Canada.ca
Reporting business income or capital gains from the disposition of cryptocurrency
What is a disposition?
This refers to the way you get rid of something, such as by giving, selling or transferring it. In general, possessing or holding a cryptocurrency is not taxable. But there could be tax consequences when you do any of the following:
- sell or make a gift of cryptocurrency
- trade or exchange cryptocurrency, including disposing of one cryptocurrency to get another cryptocurrency
- convert cryptocurrency to government-issued currency, such as Canadian dollars
- use cryptocurrency to buy goods or services
Is it business income or capital gain?
The income you get from disposing of cryptocurrency may be considered business income or a capital gain. In order to report it correctly, you must first establish what kind of income it is.
The following are common signs that you may be carrying on a business:
- you carry on activity for commercial reasons and in a commercially viable way
- you undertake activities in a businesslike manner, which might include preparing a business plan and acquiring capital assets or inventory
- you promote a product or service
- you show that you intend to make a profit, even if you are unlikely to do so in the short term
Business activities normally involve some regularity or a repetitive process over time. Each situation has to be looked at separately.
In some cases, a single transaction can be considered a business, for example when it is an adventure or concern in the nature of trade. Whether you are carrying on a business or not must be determined on a case by case basis. For more information, please review our archived content on an
adventure or concern in the nature of trade.
Another factor in deciding if there is a business activity is the date when the business begins. If you are still setting up or preparing to go into business, you might not be considered to have started the business. You usually have to undertake significant activity that is part of your income-earning process. Any funds or property you receive before your business begins are not generally considered to be business income. Similarly, you cannot claim deductions for income tax purposes before the business begins. For more information, please review our archived content on the start of
business operations.
Some examples of cryptocurrency businesses are:
- cryptocurrency mining
- cryptocurrency trading
- cryptocurrency exchanges, including ATMs
Paragraphs 9 to 32 of
Interpretation Bulletin IT-479R : Transactions in securities, provide general information to help you figure out if transactions are income or capital gains. Although the discussion of income and capital in this interpretation bulletin is helpful, remember that cryptocurrencies are not Canadian securities under the Income Tax Act.
Reporting as either income or capital gain
Generally, if disposing of cryptocurrency is part of a business, the profits you make on the disposition or sale are considered business income and not a capital gain. Buying a cryptocurrency with the intention of selling it for a profit may be treated as business income, even if it’s an isolated incident, because it could be considered an adventure or concern in the nature of trade.
If the sale of a cryptocurrency does not constitute carrying on a business, and the amount it sells for is more than the original purchase price or its adjusted cost base, then the taxpayer has realized a capital gain.
Capital gains from the sale of cryptocurrency are generally included in income for the year, but only half of the capital gain is subject to tax. This is called the taxable capital gain. Any capital losses resulting from the sale can only be offset against capital gains; you cannot use them to reduce income from other sources, such as employment income. You can carry forward your capital losses if you do not have any capital gains against which to offset those losses for the year or any of the preceding three years.
For more information on capital gains, see
Guide T4037, Capital Gains.
