One of the toughest elements of trading in crypto, for people all over the world, is the question of how it is handled when it comes to taxation. This is a particularly confusing question because, depending on where you live, your government may or may not have regulations in place for cryptocurrencies. Canada is one of the first among the world’s leading economies in actually implementing laws around crypto, including its taxation.
The question of how to tax crypto is always going to be a muddied one because there is a big difference between crypto and fiat currencies. To be specific, this difference lies in the fact that crypto transactions are anonymous by nature. This means they can’t be taxed at the source, because there is no existing infrastructure to do that. Nonetheless, as current Canadian crypto regulations make clear, there are cases in which crypto can be taxed, and you will be expected to declare qualifying crypto transactions and holdings for taxation purposes.
How is crypto taxed in Canada?
The taxation of an asset is based, in general, on what type of asset it is. For Canadian taxation purposes, cryptocurrency is viewed as a commodity and subject to Capital Gains Tax. In other words, when you take ownership of an amount of crypto, unless there is a competing reason to tax it another way, it will be taxed as a capital gain. The amount of it that is taxed will depend on the tax margin into which it falls, which is changeable. For the sake of understanding, though, let’s take a theoretical example:
● You gain an amount of crypto worth $20,000
● It is treated as a commodity and taxed as a capital gain.
● Importantly, only 50% of your capital gains are taxable. So, in this case, that’s $10,000.
● The next bit is tricky, and for the sake of this guide, it is purely theoretical. However, let’s say the capital gains tax rate for your bracket is set at 33%.
● On the crypto transaction of $20,000, you will pay tax on $10,000 at a rate of 33%. This would mean you pay $3,300 tax on your gain of $20,000.
● You would pay it in dollars, not in crypto.
However, if you can show that you are paid in crypto as a matter of course, it would usually be taxed as income and would be subject to Income Tax instead.
How else may crypto be treated by tax authorities?
This is a question that should be referred to a tax attorney or accountant because it falls under financial and legal specifications. We wouldn’t want to overstep the mark in that regard, because this is really one for the qualified experts. However, what we are able to say is that, generally, betting wins are not taxed in Canada, or in most places. So unless you are advised otherwise, you would not be expected to declare winnings from a crypto casino such as Cloudbet for taxation. You certainly aren’t expected to declare fiat currency won at a casino.
Anything else we should cover?
We would merely reiterate the importance of speaking to tax experts before filing your tax return, and explaining which cryptos you own, your balances in each coin, where you came by these amounts, and the dates of any transactions. Crypto taxation in Canada is a very new and emerging field, and the law is not very forgiving if you have followed bad advice. So make sure to get good advice by asking an attorney or an accountant about your specific situation.