Expert Q&A from Welch LLP

From the CRA's Guide for cryptocurrency users and tax professionals:

"Where a taxable property or service is exchanged for cryptocurrency, the GST/HST that applies to the property or service is calculated based on the fair market value of the cryptocurrency at the time of the exchange.

If your business accepts cryptocurrency as payment for taxable property or services, the value of the cryptocurrency for GST/HST purposes is calculated based on its fair market value at the time of the transaction.

Keep all records that show how you calculated the fair market value."

“The income tax treatment for cryptocurrency miners is different depending on whether their mining activities are a personal activity (a hobby) or a business activity. This is decided case by case. A hobby is generally undertaken for pleasure, entertainment or enjoyment, rather than for business reasons. But if a hobby is pursued in a sufficiently commercial and businesslike way, it can be considered a business activity and will be taxed as such.” - from the CRA’s Guide for cryptocurrency users and tax professionals

Individuals who are income tax residents of Canada are taxed on their worldwide income, including any income earned from cryptocurrency mining. Be aware that due to the large fluctuations in daily activity across trading platforms, tax authorities may take the average of the opening and closing values of the day, and also average values across a number of major exchanges.

The CRA has indicated that cryptocurrency mining is a taxable business for Canadian tax purposes due to the fact that miners generate revenue from the sale of cryptocurrencies.

When you trade one cryptocurrency for another type of cryptocurrency, the CRA considers this a barter transaction. Since the value of the cryptocurrency has increased, any capital gains will be realized on the date you sold it.

If you are the one who traded cryptocurrencies for another type of cryptocurrency and sold that one for more than what you paid, then you most likely owe taxes on this capital gain. If you are the one who paid less, then this is considered a capital loss. Capital losses are not deductible on your tax return like income losses.

When you sell a cryptocurrency for more than what you paid, the difference is considered a capital gain. If you sell for less, then this difference is considered a capital loss.

If you are the one who has sold a cryptocurrency for more than what you paid, then you owe taxes on this capital gain. If you are the one who paid less, then this is considered a capital loss. Capital losses are deductible against other capital gains.

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