Canada to Bitcoin Miners: "Pay Yer Taxes"
April 29, 2013 10:52 AM
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Cryptocurrency is not exempt from taxation, Canadian government argues
For miners or traders who
, 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 g
overnment'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.
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
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
that it will be watching for unreported Bitcoin revenue this year.
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.
This article is over a month old, voting and posting comments is disabled
4/30/2013 9:47:47 AM
You guys are totally missing the advantage here: tax deductions. If they're going to tax you on the bitcoins you earn, you should be able to write off your computer system + portion of electricity cost as business expenses.
Simply set up a small business (LLC in the US, not sure how handled in Canada), purchase the equipment and start cranking out bitcoins. Pay the tax on bitcoins but claim the equipment as a deduction against the profit from the coins.
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