The Canada Revenue Agency issued an official release on how to treat bitcoin and other virtual currencies for taxation this week after signalling its intent to do so back in May.
The guidance gives tax advisors working with Canadian bitcoin companies something to go on when working within the bitcoin space. Although it contains no new information, it does reinforce the CRA’s previous statement on the subject.
The fact sheet, entitled ‘What you should know about Digital Currency’, is a very brief outline that simply states that tax rules apply when it is used to pay for goods and services in the same way the rules for barter transactions apply and links to the CRA’s rules on Barter Transactions after defining barter transaction and giving an example of buying movie tickets.
The CRA also points out that since digital currency can be traded like a commodity, any resulting gains can be treated as taxable income or capital for the taxpayer and links to an archived document on Transactions in Securities.
Pokerati.com’s ‘Gaming Council’ goes into the document in some depth to establish how bitcoin income might relate to the Income Tax Act quoting that: “the salary, wages and other remuneration including gratuities received by the taxpayer during the year are taxable just as they might be if they were received in US dollars, UK pounds or euros”.
Unfortunately the guidelines as published do not address the issues surrounding the taxation of bitcoin mining, and whether bitcoin will be treated as a currency for mining purposes or like gold or silver.
But the Gaming Council goes on to say they believe the CRA is “making this more complicated than it needs to be.”
“If bitcoin is used as an actual functioning currency, then there’s no reason to have to resort to the barter rules,” says the council, explaining that the taxation of mining might become clearer if transactions could be translated on the day of occurrence using a reasonable exchange rate between bitcoin and Canadian dollars.
View Canada Revenue Agency says tax rules apply to bitcoin on CoinDesk.
Source: CoinDesk
