backtop


Print 25 comment(s) - last by ppardee.. on May 3 at 2:09 PM

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



Comments     Threshold


This article is over a month old, voting and posting comments is disabled

hhmmmm
By lolmuly on 4/29/2013 1:18:01 PM , Rating: 3
if they want to collect taxes on bitcoin, how about making them payable in bitcoin?




RE: hhmmmm
By mcnabney on 4/29/2013 2:33:36 PM , Rating: 2
Governments only accept taxes in their own currency. You can't send two cows and ten chickens to the IRS (or the Canadian equivalent). Bitcoins are really more of a commodity based upon their deflationary nature.


RE: hhmmmm
By lolmuly on 4/29/2013 5:14:35 PM , Rating: 2
If the canadian government wants to levy a canadian dollar tax on coins that get converted into canadian dollars, that's fair.

However taxing a transaction made in another currency, and making said tax payable only through first converting the currency, transferring it to a bank, waiting several days for the transaction to confirm, and then submitting said tax through some surely byzantine paperwork maze is just ridiculous.

Sales taxes only work because it's immediate and the average consumer doesn't have to think about it. Anything that requires that much work will turn away even the most patriotic of super citizens.

Second Point:

You define a currency only by inflationary terms? I was under the impression that the definition of a currency was still: "A medium of exchange"

you can argue the merits of deflation/inflation but that doesn't define something as a currency. (To my knowledge almost all currencies have deflated at one point or another)

Bitcoins are appealing because I can send the value of a small island or hollywood mansion around the world several times a day at virtually no cost, instead of paying a 6% fee and waiting a week. In this way bitcoins are far more a "medium of exchange" than dollars will ever be.


RE: hhmmmm
By Kyuu on 4/29/2013 6:55:40 PM , Rating: 2
"If the canadian government wants to levy a canadian dollar tax on coins that get converted into canadian dollars, that's fair.

However taxing a transaction made in another currency, and making said tax payable only through first converting the currency, transferring it to a bank, waiting several days for the transaction to confirm, and then submitting said tax through some surely byzantine paperwork maze is just ridiculous."

Er... it *is* only taxable if bitcoins are converted into Canadian Dollars. Unless I completely misunderstood the article, bitcoins can't be taxed unless and until they exchanged for real currency.

Besides, how in the world would the Canadian Revenue Agency even know you had bitcoins until you converted it?


RE: hhmmmm
By lolmuly on 4/29/2013 8:20:52 PM , Rating: 2
Maybe I'm reading to far into this:
quote:
These rules mandate taxes on bartered goods


I presume that if a tax is collected for bartering money for bitcoins, the tax would also apply to bitcoins bartered for other goods/services


RE: hhmmmm
By Flunk on 4/30/2013 2:16:01 PM , Rating: 2
That is correct, it also applies to transactions in foreign currency. The converted Canadian dollar equivalent on the day of the transaction is used to calculate the taxes.


RE: hhmmmm
By GTVic on 4/29/2013 8:15:40 PM , Rating: 1
Not sure about the usa but up here we capitalize the name of our country.


RE: hhmmmm
By phxfreddy on 4/30/2013 9:55:35 AM , Rating: 1
See what you liberals bring us? You make life un-fun. You advocate governments involvement in even the microscopic.


RE: hhmmmm
By Flunk on 4/30/2013 2:18:38 PM , Rating: 2
You mean the kind that consistently apply laws? I'm sorry that there aren't the loopholes you're used to.


RE: hhmmmm
By ppardee on 5/3/2013 2:09:08 PM , Rating: 2
Yeah, liberals are totally about consistently applying laws. Tim Geithner cheated on his taxes and was made the treasury secretary, Timmy Public cheats on his taxes and gets hounded by the IRS using tactics that would the the Gestapo pause.

Or how about how everyone (except those who donated to the DNC) has to comply with Obamacare...

Totally consistent.


“Then they pop up and say ‘Hello, surprise! Give us your money or we will shut you down!' Screw them. Seriously, screw them. You can quote me on that.” -- Newegg Chief Legal Officer Lee Cheng referencing patent trolls














botimage
Copyright 2014 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki