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Crypto tax taxation for trading cryptocurrencies like Bitcoin and alt-coins

Crypto Tax Canada: Filing Income Tax Guide

Canada crypto tax is triggered whenever a taxable crypto transaction of any type. Tax due is calculated whether it is a capital gain or business income.  How much tax is due is dependent on each individual scenario. 

Canada crypto tax: all crypto is taxable in Canada. 

Crypto tax is administered by the Canada Revenue Agency (CRA), Cryptocurrency is a digital representation of value that is not legal tender. The CRA generally treats cryptocurrency like a commodity for purposes of the Income Tax Act. Any income from transactions involving cryptocurrency is generally treated as business income or as a capital gain, depending on the circumstances. Similarly, if earnings qualify as business income or as a capital gain then any losses are treated as business losses or capital losses.

 

This guide is regularly updated

 One quick thing before we jump into it - the rules on crypto tax in Canada are in constant flux. At Forte, we keep a very close eye on the CRA's crypto policies and regularly update this guide to keep you informed and tax compliant.

 

    • 23 February 2022: Tax-filing season is open. Deadline is 2 May (as 30 April falls on weekend)
    • 20 January 2022: Updated to include the newly released Schedule 3 for the 2021 financial year.
    • 7 December 2021: New year, new guide for 2022!
    • 25 March 2021: Coinsquare ordered to release customer records to CRA. 
    • 10 November 2020: CRA announces 2021 filing deadline as 30 April 2021.
    • June 1, 2020: All cryptocurrency exchanges must register with FINTRAC

 

Can the CRA track me? 

Yes. As of June 1, 2020, all crypto exchanges operating in Canada must be registered with FINTRAC (Financial Transactions and Reports Analysis Centre of Canada). In turn, the CRA is registered with FINTRAC.  FINTRAC regulates financial institutions and investigates money laundering and tax evasion. 

Similarly, on January 1, 2022, all money dealing services business in Canada have to notify the CRA of any transaction over $10,000. This means that if you send $10,000 to any crypto exchange operating in Canada, the bank will report it to the CRA. 

When you open an account in Canada, FINTRAC requires that the exchange obtain and verify your identity. This means that your ID is linked with your wallet at the exchange. 

Besides, Coinsquare, the CRA hasn't published a list of exchanges that it's working with. 

The best way to stay tax compliant is to report your crypto taxes. 

 

What is the treatment of crypto tax in Canada? 

Crypto tax in Canada is based on self-assessment and disclosure.  How you classify whether you’re carrying a business or capital gain will be determined by the following rules:

 

  • 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

 

To be classified as a business, you have to regularly and frequently transact in cryptos and alt-coins. The CRA doesn’t have a set number of transactions that would help a taxpayer because no two taxpayer is created equal. it’s up to their professional judgement.  

 

When you start your business also has a weigh.  If you’re still setting up your business, the CRA may not consider that you have started the business.  A business may be considered started once the business has significant activity related to “earning income”. 

 

What cryptocurrency and alt-coin activities is considered as carrying business?

 

  • cryptocurrency mining
  • cryptocurrency trading
  • cryptocurrency exchanges, including ATMs

My employer pays my salary in crypto, what my tax implication?

In early 2022, the CRA does not have an official guidance on the treatment of salaries paid in crypto.  To be tax compliant, we recommend talking a tax lawyer. 

The New Zealand crypto tax model for salary is one called Pay As You Earn (PAYE) tax system — in which employers deduct tax and other payments before wages are paid.  Would Canada Revenue Agence (CRA) adopt a similar model?  It is a resonable notion.  We recommend talking to a tax law professional. 

Reference: New Zealand tax authority approves crypto salaries

 

Canada crypto tax is treated as a commodity. It is fully taxable.

 

What is the difference between a business vs. a hobby for crypto tax? 

 The distinction between HOBBY AND BUSINESS trading has major tax implications. If the cryptocurrency transactions in question are being conducted as a hobby, then any gains made are capital in nature. This means that only 50 percent of those gains will be taxed. If these are business transactions, then 100 percent of the gains are taxed, just like business income. Having said that, as a business, you can also claim an array of business deductions.

The Canada Revenue Agency considers each taxpayer’s case individually.  

What do you need to get started with crypto taxes? 

 Before you start doing your taxes, you need to grab your data from the exchanges like Binance, Koinly, Bitbuy and others, that you've used in the last year.  Learn more about what data is needed to do crypto tax. 

The information will help calculate the adjusted cost (ACB).  That's the cost paid to obtain your crypto assets. Any transaction fees will be deducted from your costs.  

On the other hand, if you were gifted cryptos, your adjusted cost based will be zero.  This means that your entire proceeds on disposal will be taxable.  

 

How much tax on crypto gains canada?

How much tax you pay on crypto gains in canada is very dependent on your individual tax situation and province of residence.  

Let's consider that you're in the capital gains group, where you have been holding and not daytrading. In Canada, 50% of the gains or losses will be qualified as taxable gains or losses.  If you're paying taxes, you have to pay them in the tax reporting year.  On the other hand, if you've lost money, the loss can be carried forward indefinately.  The loss carryforward can be used against any gains in future years gains.  Thus, lowering your taxes.  In other words, the government takes taxes when you gain but lets you have a "loss credit" when you've lost capital.  Unlike many other countries, short-term and long-term capital gains are taxed the same way in Canada.

The declaration is done in the annual individual tax return. 

Below are the capital gains tax tables for each province and territory. 

 

Federal Tax Rate

Tax RateIncome (2021)Income (2022)
15% On your first $49,020 of taxable income On your first $50,197 of taxable income
20.5% $49,021 - $98,040 $50,197 - $100,392
26% $98,041 - $151,978 $100,392 - $155,625
29% $151,979 - $216,511 $155,625 - $221,708
33% $216,512+ $221,708+

 

 

Newfoundland and Labrador Provincial Tax Rate

Tax Rate (2021)Income (2021)Tax Rate (2022) Income (2022)
8.7% On the first $38,080 of taxable income 8.7% On the first $39,147 of taxable income
14.5% $38,081 - $76,161 14.5% $39,147 - $78,294
15.8% $76,161 -$135,973 15.8% $78,294 - $139,780
17.3% $135,973 -$190,363 17.8% $139,780 - $195,693
18.3% $190,363+ 19.8% $195,693 - $250,000
- - 20.8% $250,000 - $500,000
- - 21.3% $500,000 - $1,000,000
- - 21.8% $1,000,000+

 

Prince Edward Island Provincial Tax Rate

Tax RateIncome (2021)Income (2022)
9.8% On the first $31,984 of taxable income On the first $31,984 of taxable income
13.8% $31,984 - $63,969 $31,984 - $63,969
16.7% $63,969+ $63,969+

 

Nova Scotia Provincial Tax Rate

Tax RateIncome (2021)Income (2022)
8.79% On the first $29,590 of taxable income On the first $29,590 of taxable income
14.95% $29,590 - $59,180 $29,590 - $59,180
16.67% $59,180 - $93,000 $59,180 - $93,000
17.5% $93,000 - $150,000 $93,000 - $150,000
21% $150,000+ $150,000+

 

New Brunswick Provincial Tax Rate

Tax RateIncome (2021)Income (2022)
9.68% On the first $43,835 of taxable income On the first $44,887 of taxable income
14.82% $43,835 - $87,671 $44,887 - $89,775
16.52% $87,671 - $142,534 $89,775 - $145,955
17.84% $142,534 - $162,383 $145,955 - $166,280
20.3% $162,383+ $166,280+

 

Ontario Provincial Tax Rate

Tax RateIncome (2021)Income (2022)
5.05% On the first $45,142 of taxable income On the first $46,226 of taxable income
9.15% $45,142 - $90,287 $46,226 - $92,454
11.16% $90,287 - $150,000 $92,454 - $150,000
12.16% $150,000 - $220,000 $150,000 - $220,000
13.16% $220,000+ $220,000+

 

Manitoba Provincial Tax Rate

Tax RateIncome (2021)Income (2022)
10.8% On the first $33,723 of taxable income On the first $34,431 of taxable income
12.75% $33,723 - $72,885 $34,431 - $74,416
17.4% $72,885+ $74,416+

Saskatchewan Provincial Tax Rate

Tax RateIncome (2021)Income (2022)
10.5% On the first $45,677 of taxable income On the first $46,773 of taxable income
12.5% $45,677 - $130,506 $46,773 - $133,638
14.5% $130,506+ $133,638+

 

Alberta Provincial Tax Rate

Tax RateIncome (2021)Income (2022)
10% On the first $131,220 of taxable income On the first $131,220 of taxable income
12% $131,220 - $157,464 $131,220 - $157,464
13% $157,464 -$209,952 $157,464 -$209,952
14% $209,952 - $314,928 $209,952 - $314,928
15% $314,928+ $314,928+

 

British Columbia (B.C.) Provincial Tax Rate

Tax RateIncome (2021)Income (2022)
5.06% On the first $42,184 of taxable income On the first $43,070 of taxable income
7.7% $42,184 - $84,369 $43,070 - $86,141
10.5% $84,369 - $96,866 $86,141 - $98,901
12.29% $96,866 - $117,623 $98,901 - $120,094
14.7% $117,623 - $159,483 $120,094 - $162,832
16.8% $159,483 - $222,420 $162,832 - $227,091
20.5% $222,420+ $227,091+

 

Yukon Provincial Tax Rate

Tax RateIncome (2021)Income (2022)
6.4% On the first $49,020 of taxable income On the first $50,197 of taxable income
9% $49,020 - $98,040 $50,197 - $100,392
10.9% $98,040 - $151,978 $100,392 - $155,625
12.8% $151,978 - $216,511 $155,625 - $221,708
12.96% $216,511 - $500,000 $221,708 - $500,000
15% $500,000+ $500,000+

 

Northwest Territories Provincial Tax Rate

Tax RateIncome (2021)Income (2022)
5.9% On the first $43,396 of taxable income On the first $45,462 of taxable income
8.6% $44,396 - $88,796 $45,462 - $90,927
12.2% $88,796 - $144,362 $90,927 - $147,826
14.05% $144,362+ $147,826+

 

Nunavut Provincial Tax Rate

Tax RateIncome (2021)Income (2022)
4% On the first $46,740 of taxable income On the first $47,862 of taxable income
7% $46,740 - $93,480 $47,862 - $95,724
9% $93,480 - $151,978 $95,724 - $155,625
11.5% $151,978+ $155,625+

 

Quebec Provincial Tax Rate

Tax RateIncome (2021)Income (2022)
15% On the first $45,105 of taxable income On the first $46,295 of taxable income
20% $45,105 - $90,200 $46,295 - $92,580
24% $90,200 - $109,755 $92,580 - $112,655
25.75% $109,755+ $112,655+

 

Are there crypto tax breaks? 

 

1. 50% of your crypto gains are taxable:

When you calculate your crypto taxes (assuming that you're claiming capital gains and not running a crypto business), half of your gains/losses are used to calculate taxes at your combined Federal and Provincial tax rates. The easiest way is to add up all your capital gains and then halve the amount. That's how much you'll pay tax on. First you need to have accurate numbers. Our experience is that software packages such as Koinly and Crypto Tax Calculators, that claim to calculate your crypto taxes are in their infancy.  The numbers can swing wildly. Thus, clients reach out to us to help them calculate their cryto gains and losses, which they can use to file their own income taxes or give them to their accoutants; we can also help. 

2. Personal tax allowance:

In 2022, the first $14,398 earned is tax free in Canada.  In 2021, the allowance was $13,808. The allowance is usually increased every year to allow for inflation. 

3. Spousal Tax Credits:

Each year, the CRA updates the amount of Basic Personal Amount (BPA), if you don't use them, you can transfer them to your spouse as long as you're married or in a common law relationship.  For example, if you earn $70,000 a year and your partner earns $10,000 a year, you’d be able to claim the difference between your partner’s income and the BPA - in this example, $4,398.

4. Donation credits:

If you are the donating type, you can reduce your crypto tax due by donating. You can claim your donations amount up to 75% of your net income with some exceptions. You can also gather all your donation receipts for up to 5 years to get a biggest bang rather than claiming them in the year the donation was made.  It could drop you to the next lower tax bracket!

 

 

What should you do?

Wherever your cryptocurrency activities fall, it is advisable to talk to your accountant.  Paying for an accountant’s advise will guarantee that the solution will be tailored to you and will be 100% true. 

We recommend that you have all your crypto data organized and put together so your conversation with an accountant will be quick and effective of your time and investment.  Please read the article on Dealing With Crypto Tax and Accounting for tips on how to gather your data.

 

 Reference: Tax treatment of cryptocurrency for income tax purposesTax treatment of cryptocurrency for income tax purposesTax treatment of cryptocurrency for income tax purposes

 

 

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