Cryptocurrency is no longer the new kid on the block in Canada. It’s here to stay as an integral part of the economy. With popular digital assets like Bitcoin and Ethereum gaining ground, Canada’s tax rules and regulations are evolving right alongside them.
Whether you’re a curious first-time investor or an active trader, you’re going to want a handle on how Canada’s crypto tax system works. The Canada Revenue Agency (CRA) interprets cryptocurrency as a taxable commodity, meaning for investors and brokers, there’s no skirting around the tax part.
This guide, brought to you by Newton OTC, breaks down Canada’s crypto taxation system in a more consolidated and straightforward way, focusing on what investors and businesses handling significant crypto transactions need to know in 2024.
While this guide gives a comprehensive and practical overview, it shouldn't be considered official tax advice. For personalized insights into tax time, speak with a crypto-friendly accountant in Canada who can keep your records accurate.
With this disclaimer out of the way, let’s take a look at what you need to know when it comes to Canada’s crypto tax setup for 2024.
Cryptocurrency isn’t just catching the attention of Canadian investors, the folks at the Canada Revenue Agency (CRA) are taking careful note, too. They’ve made it clear—crypto isn’t considered a ‘currency’ for tax purposes.
Instead, CRA treats digital assets like a commodity, similar to stocks or real estate, so each time you buy, sell, or trade your crypto, there are well-defined tax considerations at play.
Under CRA rules, digital assets fall under commodity tax law, which shapes how gains, losses, and transfers are reported. Any trade, sale, or purchase of crypto is considered a taxable event, whether it’s Bitcoin, Ethereum, or even stablecoins.
The CRA expects every single crypto transaction to be reported accurately, so keeping extremely thorough records of every exchange and transaction (including exchange prices) is important.
As the Canadian government is still in the process of refining tax obligations for digital assets, for now, the tax laws surrounding crypto are still a moving target. These rules build transparency and ensure everyone is accurately reporting both gains and losses.
Staying up to date with any changes regarding the evolving Canadian crypto regulations is smart and helps avoid surprises and stay aligned when tax season rolls around.
If you’re a Canadian involved in crypto trading, it’s essential to understand just what the CRA considers to be a ‘taxable event.’ Because the CRA classifies digital assets as commodities, nearly any use of crypto comes with inherent tax responsibilities.
Knowing exactly when you owe tax on crypto helps you stay compliant and avoid complications, especially if you are subject to an audit.
For Canadian taxpayers, a ‘taxable event’ happens whenever there’s a “disposition” of cryptocurrency. Disposition refers to any sale, exchange, or use of crypto that changes its value.
In Canada, these are the most common scenarios, or “triggers” where taxation will apply.
Swapping one coin for another, like a Bitcoin (BTC) for a Ripple (XRP), is considered disposition by the CRA—even if it’s just a crypto-to-crypto trade.
The CRA views these as “barter transactions,” so you will need to determine the Fair Market Value (FMV) at the point of the transaction in Canadian Dollars. Any profit or loss from these types of transactions, whether a casual trade or a frequent business trade, is taxable.
Converting a cryptocurrency into a “fiat” currency is also a taxable event, regardless of the currency received during the transaction.
The CRA expects you to report any capital gains or losses from these types of sales. For example, if you sell Ethereum for Canadian Dollars, reporting would typically go on Schedule 3 for capital gains or Form T2125 if the sale counts as business income.
Is using crypto to pay for something taxable? You guessed it, this too, is considered a ‘barter transaction’ and is subject to taxes.
You’ll need to report the FMV of the crypto at the time of the purchase, and if you’re a business accepting crypto, you must also include this in your income. For individuals, this means recording any losses or gains based on what you originally paid for the crypto.
NFTs (Non-Fungible Tokens) also come under the CRA’s tax regulations. Buying or selling an NFT counts as a disposition, meaning any profit from the sale of one may be taxable as either capital gains or business income.
It is largely dependent on how the CRA classifies the transaction. If you are selling NFTs you yourself have created, you will need to report this as business income using Form T2125.
Mining or staking crypto is considered business income if it is done with “some regularity,” or the CRA considers the mining a “repetitive process over time.”
The CRA itself considers the mining and staking of crypto somewhat of a grey area and tends to classify the activity on a case-by-case basis. If the CRA does consider mined crypto as “earned income,” the taxation on this income will be considered on its FMV at the time of mining.
Even if mining is just a hobby, it could be viewed as business income depending on factors such as how often you mine and if the mining is considered “intent to earn.”
If you’re giving crypto as a gift or even a donation, the CRA considers this disposition.
It requires you to report any gains or losses depending on the FMV at the time of gifting. Donations of cryptocurrency come with very complex reporting and regulation requirements.
If you’re a charity that has received a crypto donation, it is strongly advisable that you work with an accountant or tax professional to ensure your obligations are met.
In short, yes. All relevant crypto transactions must be reported. The CRA requires that any taxable event, from cashing out to exchanging or making purchases, needs to be on the books.
The CRA’s stance on this is firm, and transparency is a must. Keeping thorough records and tracking gains and losses will help you stay in line with Canadian crypto tax laws.
In Canada, crypto tax focuses more on when you use or sell your digital assets rather than just when you buy them.
While buying or receiving cryptocurrency isn’t taxable, it still matters because the amount you pay (the “cost basis”) becomes important when you eventually conduct a transaction considered to be a disposition. Keeping track of this purchase price will help you determine any gains or losses when it comes time to report.
Importantly, you should note that the CRA does not consider mining and staking to be acquisitions.
When it comes to making profits with crypto in Canada, the tax treatment ultimately falls into one of two categories: capital gains or business income. As the lines separating the two aren’t so clear when crypto is involved, the CRA evaluates each person’s specific crypto activities to decide which path you’re going down.
The distinction is quite profound as the tax outcome between the two varies wildly.
For most people casually investing in crypto, profits are classified as capital gains and carry a much lighter tax load. With capital gains, the CRA views your crypto profits as a capital asset, and at the time of this writing, approximately half (50%) of any profit goes toward your taxable income if it is considered a capital gain.
An example of this is buying and then holding Bitcoin for a while, then selling it later at a profit. This is seen as a capital gain and is thus reported using the Schedule 3 of your tax return under “Capital Gains and Losses.”
It is important to note that capital gains only come into effect ast certain thresholds for individuals and corporations and to be aware of the current capital gains rules and exemptions. More info on that here.
Things become a little more interesting (and complicated) if your crypto activities begin to reflect business activities, like frequent trading. In this case, the CRA may opt to consider your trading as business income instead, making the full amounts of profits subject to taxation.
The CRA will look at several factors when deciding if your crypto profits are considered taxable as capital gains or business income. Here is what they typically assess:
In addition to these, if your activity starts to “look” like a business, then profits may end up being declared as business income. Looking like a business can mean advertising, conducting transactions like a professional, or following a dedicated business plan.
If you sell or trade crypto for more than what you paid, the CRA considers this a capital gain—and you will owe tax on part of this profit. Specifically, the CRA requires that approximately 50% of your profit be added to your overall taxable income.
For example, let’s say you bought Bitcoin (BTC) for $5,000 and then sold it for $8,000—you’ve got yourself a $3,000 gain. Half of this $3000 gain ($1500) is taxable and should be reported under Schedule 3, “Capital Gains and Losses”.
Handling taxes in the crypto space isn’t something only individuals need to understand and worry about. Corporations dealing with digital assets also face unique challenges when staying on the right side of Canadian tax laws.
In Canada, the CRA has specific rules that apply to businesses, and these can change depending on whether or not the crypto is classified as a capital asset, business inventory, or part of the regular income.
How a corporation treats its cryptocurrency holdings depends heavily on what the crypto is being used for:
Capital Asset: If the company holds crypto as a long-term investment, any profits will generally fall under capital gains. Only a certain percentage of those gains are taxable, and capital losses can offset other capital games, but not regular income.
Inventory: If your business or corporation actively trades crypto or integrates it into its core operations, the CRA will classify these holdings as business inventory.
Any profits made on these holdings are treated as business income and will be fully taxable. Losses made on these holdings can be used to offset your regular business income.
When filing taxes, corporations must report all crypto-related gains, losses, and income on their T2 Corporate Income Tax Return, while adjustments for any non-deductible amounts are handled on Schedule 1.
If your company engages in mining or staking of cryptocurrency as part of its core operations, the CRA sees the value of any crypto earned as business income.
This means you will need to record the FMV of the crypto on the day it was acquired and include this amount in your taxable income.
For corporations managing significant crypto transactions, Newton OTC offers a way to streamline the process. Newton Over the Counter Trading specializes in high-volume trading above $30,000 and makes it easier for businesses to maintain accurate FMV reporting for tax compliance.
Newton OTC provides transaction histories and detailed breakdown reporting, which can help simplify the often-complicated process of reporting taxable events. Whether you’re consolidating holdings or need to manage large trades, Newton OTC helps corporations and businesses stay compliant when it comes to Canadian tax.
For anyone wondering, ‘Can I claim crypto losses on my taxes?’—yes, and it’s a great way to ease your tax burden by balancing out gains from other investments.
If you have taken a loss on crypto by selling it for less than you paid, you are able to claim it as a capital loss. This loss can offset any capital gains and ultimately help to reduce your tax bill by reducing your overall taxable income.
Even if you don’t have gains to offset in the current year, the CRA allows you to carry the loss back up to 3 years or forward it indefinitely to offset gains from previous years.
Like a gain, reporting losses is done via the Schedule 3 “Capital Gains and Losses” section.
If you use cryptocurrency to buy a tangible good or service in Canada, you’re essentially entering multiple tax zones, each with its own set of rules. Since the CRA doesn’t consider crypto to be legal tender, any transaction, whether you’re buying a house or a butter tart, is treated as a “barter transaction.”
In other words, using or accepting crypto as a payment is seen as a trade of commodities.
For the purposes of tax, each party is required to report the Fair Market Value (FMV) of the goods or services exchanged in Canadian Dollars, based on the FMV at the moment of transaction.
For businesses that accept crypto as payment, this means including the FMV in their income, which will then affect their overall tax obligations. The CRA provides an extensive list of goods and services covered under GST/HST, which you can find here.
If your business accepts crypto as payment or manages large-scale transactions, Newton OTC provides detailed transaction records to simplify the GST/HST component of taxation reporting.
When accepting crypto as a payment, there’s another layer that needs to be considered: Goods and Services Tax (GST) or Harmonized Sales Tax (HST). The CRA requires that GST/HST be calculated based on the crypto FMV at the time of payment.
The best way to get an accurate FMV is to check the exchange rate on the day or use a crypto tax calculator like Koinly.
An example, if an Ontario bakery accepts Bitcoin for bread, they are the ones responsible for determining the value of Bitcoin in Canadian Dollars at that moment and then applying the correct GST/HST rate.
All cryptocurrency transactions should be recorded by businesses and should include:
This record-keeping is crucial for protecting both the business and the individual from future audits and helps ensure transparency in crypto-based transactions.
If you’re a Canadian taxpayer either by citizenship or residency and hold cryptocurrency outside of Canada, there are some special reporting requirements to keep in mind—especially if the total value of your foreign digital assets exceeds $100,000 CAD at any point in time during the tax year.
In this case, Canadian law requires you to file Form T1135, otherwise known as the Foreign Income Verification Statement. It covers any foreign property, including crypto held in a non-Canadian exchange or wallet.
As the CRA treats crypto held outside of Canada as foreign property, it falls under the same reporting rules as other foreign assets. Even if the overseas exchange doesn’t report directly to the CRA, the responsibility to disclose the holdings still falls on the taxpayer.
If your foreign digital assets did exceed the $100,000 CAD mark at any point during the reporting year, these can be reported using the FMV of the assets as well as their value at year-end.
Failure to report your overseas crypto can lead to very hefty penalties, so it’s recommended to always stay on top of the details. Keep detailed recordings, and all foreign crypto transactions with their dates and FMV in Canadian dollars.
This will mean you’re more than covered in the event the CRA has questions regarding your holdings.
Newton OTC assists Canadian businesses and high-net-worth individuals managing foreign crypto by providing comprehensive transaction reporting for efficient compliance with CRA regulations.
In the eyes of the CRA, cashing out your crypto either by selling or withdrawing from an exchange counts as a disposition and taxable event. Some investors may think they can cash out crypto without the knowledge of the CRA and skip paying taxes.
For those wondering how to cash out crypto without paying taxes, the simple answer is that you can’t. The CRA keeps a very close eye on crypto transactions and receives reports from all registered Canadian exchanges. Unreported gains can and do lead to extensive audits and severe penalties.
In fact, for the 2023-2024 fiscal year, the CRA is actively reviewing $54 million of suspected unpaid taxes on crypto alone. It’s a clear sign that they are serious about enforcing tax compliance for crypto in Canada.
Avoid nasty surprises by maintaining accurate records of all purchase costs and sale values, and retaining all related paperwork. Newton OTC offers a white-glove cash-out service with transparency, helping high-net-worth individuals trading in large volumes track fair market value for accurate tax reporting.
Just as with your income and business dealings, the CRA expects meticulous record-keeping of all cryptocurrency transactions. Detailed documentation is essential not only for accurate tax reporting but also for your own peace of mind should you find yourself being asked for more information.
Here is a quick rundown on what records to keep as a minimum:
Stay organized and tax season will be a breeze—at least when it comes to your crypto.
If you’re a Newton OTC client, these details will always be provided to you post trade but don’t ever hesitate to reach out to your dedicated Account Representative if you’d like the information provided again.
From the crypto-curios to certified crypto traders, understanding and following Canadian crypto tax rules is key for everyone transacting in the digital space.
Staying up-to-date on CRA guidelines keeps you in the clear and prevents any year-end panic and surprises come tax time.
Newton OTC takes the hassle out of managing crypto taxes for Canadian investors and businesses. When it comes time to pull your trade history, reach out to your dedicated Newton OTC representative in order to get detailed information on your history if needed.
Looking to make Canada’s crypto tax easier? Sign up with Newton OTC now for best-in-class crypto trading and report.
