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Cryptocurrency is not exempt from taxation, Canadian government argues

For miners or traders who ride the volatile market for the cryptocurrency Bitcoins, the digital money can be a lucrative source of real-world income.  Bitcoins in theory are unregulated by any government entity and difficult to trace.  But the Canadian government is looking to change that.

With Bitcoin cash value increasing five-fold to around $250 USD/Bitcoin in April, the Canada Revenue Agency is salivating at the prospect of extra taxes from its domestic miners/traders.  The CRA says that when using Bitcoins for transactions Barter Transaction rules -- long an offline-focused rulebook -- are in effect.  These rules mandate taxes on bartered goods, and Bitcoins are no exception.  The government's rules state that the value of what is received is used to determine the value of what's given up.

Paragraphs nine through 32 of the CRA's section IT-479R, Transactions in Securities, explain that Bitcoins sold for real world money are either counted as income or capital gains.

Bitcoin ButtonBitcoin badges
The CRA will be hunting for Bitcoin tax dodgers for the first time.
[Sources: Bitcoin Forum (left); Nerd Merit Badges (right)]

Some Canadians are already claiming Bitcoin income on their taxes.  Comments Regina currency trader Jeff Cliff in a CBC interview, "It's fairly anonymous system.  I'm not so much into the privacy side of it, so that's why I claim it."

Others feel the government should keep their hands off Bitcoins.  But Canadians who think the CRA is treating Bitcoin earnings or barter as an "honor system" may be in for a rude surprise.  The CRA told the CBC that it will be watching for unreported Bitcoin revenue this year. 

CRA taxes
The CRA will reportedly crack down on unreported Bitcoin revenue. [Image Source: The CP]

Saskatoon realtor Paul Chavady who has taken the unusual step of allowing buyers to use Bitcoins, explains how this could work, commenting, "When you sell [the BitCoins], they will deposit that in your account.  As soon as it turns into Canadian dollars, it's back in the eyes of the CRA and everybody else. If you get a big deposit of $10,000, or $100,000, [CRA is] going to say, 'Hey, where did that come from?'"

In other words don't count on cryptography to protect you if you cash out your Bitcoin wealth for real world purchases; the (Canadian) tax man knows better.

Source: CBC

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By Flunk on 4/29/2013 11:37:15 AM , Rating: 4
The fact that Bitcoin earnings are taxable is pretty obvious under the Canadian tax system. Any income, regardless of value and source is taxable. Good luck with the $10,000 or more transactions though. Very, very few people are making that kind of money on Bitcoins.

This article is written as if this is a new thing and that confuses the issue. CRA is just announcing that they're going to be watching out specifically for Bitcoin this year.

RE: Obvious
By Cheeseavatar on 4/29/2013 11:40:25 AM , Rating: 2
I was just about to post the same thing, you beat me to it.

Though one correction, I don't believe there is a $10000 transaction. I believe the (and please done quote me on this) tax code says anything you do to make money (professionally).

For example in Canada we do not take taxes on lotto or casino winning. But if you play poker everyday and that is your main source of income, it will be taxed.

If you have another job and play pokers on the weekend for fun than its not taxed.

There is the line.

RE: Obvious
By Flunk on 4/29/2013 11:41:37 AM , Rating: 2
You missed what I meant, there is no $10,000 minimum on transactions for them to be taxable. CRA announced that they will be looking for transactions higher than $10,000.

RE: Obvious
By MadMan007 on 4/29/2013 12:07:51 PM , Rating: 2
Did they? I don't see that in the article or in the linked CRA law. The dollar amounts mentioned toward the end of the article were examples by a bitcoin user.

RE: Obvious
By Flunk on 4/30/2013 2:21:05 PM , Rating: 2
True, I forgot that you have to check the sources on anything you read on this website.

RE: Obvious
By Director12 on 4/29/13, Rating: 0
RE: Obvious
By Kyuu on 4/29/2013 6:52:11 PM , Rating: 2
Nothing funny about it. Paying taxes is not analogous to paying money to a street gang.

Not to mention, since when does anyone hand over tax money "with hardly a grumble"? Taxes are one of the things most grumbled about by everyone everywhere.

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