Cryptocurrencies have become popular all over the world, and despite their high volatility, virtual currencies are attracting investors as some have provided unrealistic returns to holders over a specific time period.
The prospect of making gains attracts people to the stock and cryptocurrency markets. However, profits and taxes come together.
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In this article, let’s find out if you have to pay taxes on cryptocurrencies in Canada.
What is the cryptocurrency tax rule in Canada?
Now is the time to start preparing for crypto taxes for those who cashed in any of their virtual currencies in 2021. According to reports, tax returns could be filed as early as the last date of this month, and the deadline is April 30.
According to the Canada Revenue Agency (CRA), taxable events occur when an individual sells cryptocurrency, also known as a disposition of assets.
Typically, the common disposition of crypto assets would be considered selling cryptocurrency, paying for goods and services using cryptocurrency, converting cryptocurrency into fiat currency, and gifting crypto.
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Only crypto transactions are considered for taxes in Canada, and there are no tax requirements for holding crypto. The CRA treats virtual currency as a commodity and considers transactions related to virtual currencies as business income or capital gain.
At the end of the line
Crypto traders must report their cryptocurrency income to the CRA. Simply put, not reporting income from cryptocurrencies could be considered a violation of the law, and the CRA could treat it as a matter of tax evasion.
In Canada, the fine for tax evasion can double up to the amount of the tax or a person can even be sentenced to prison. Additionally, a person could also be charged with interest and unpaid tax debts, as well as fines for tax evasion.
To understand what falls under cryptocurrency revenue, you can visit the Government of Canada website.
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