In life only two things are certain : death and taxes. In this post I will try to cover as best as I can the way canadians have to pay taxes on crypto.
DISCLAIMER : Please always consult a lawyer or and accountant before making tax related decisions. This blog is for information only!
When ?
You only pay taxes when you sell your cryptos to fiat (and the fiat is deposited in your bank account). Since the government can't really know when you sold your crypto to an other crypto they can't really tax it (Unless you are 100% by the book type of person. Then you should keep track of every single crypto to crypto transaction and record your gain/loss at that date).
My advice would be to keep track of your initial cost. Learn to do that HERE. Once you want to cash out the crypto to fiat, just calculate the gain you made at that time (Initial cost - Sell price at cash out date).
The good thing with cryptocurrency is that the transactions are anonymous . The government have no way of knowing when you sold, unless you cash out. That's why you only get taxed when you cash out in fiat, using this method.
Way of getting taxed?
The question here is : is a Bitcoin inventory (merchandise) or is it a currency (capital property)?
This means that the CRA can use two different methods to tax your crypto.
The CRA has made a statement about that :
Whether a virtual currency such as bitcoin is held as inventoryor as a capital property is also a question of fact.
Inventory
The ARC also stated that if you use your crypto like a merchandise (and not like an investment/capital property) you could potentially pay the normal tax rate. You would pay taxes on your profits. (EX : the same rate used to pay your taxes on your salary, depending on your bracket). Unless you are mining or have lots of activity in crypto, this would be harder to prove as it makes you pay less taxes (since you can deduct expenses).Capital property
In Canada the ARC stated that gains from any crypto is a capital gain (50% of the gain is taxed. EX: Sell for 100 and cost is 50 = 50 gain x 50 % = pay taxes on 25$, depending on your bracket). This second way of getting taxed is more likely for the majority of crypto users, as most of use hold our cryptocurrency like an investment.
Conclusion
Pay your taxes, get out of trouble. Remember that it's not all black or white, and this is a moving industry with laws that are not fixed!
this was good stuff!
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Thank you very much :)
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There must be away to avoid paying capital gains on bitcoin. Like if its a small amount, sure you can use a tenx or xapo debit card for living transactions and leave the salary as savings? Since i live in EU, i would rather relocate to another country to become a tax resident than pay capital gains. I may seem crazy, but i dont mind CG on anything but crypto currency.
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Yes you can avoid paying taxes by buying a bitcoin debit card! Thank you, you inspired me to talk about that, this will be my next blog post! Make sure you are following me to see the post :)
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Taking massive risk in crypto, trying to avoid banks, and yet getting taxed! This just angers me...
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I know that feeling =/
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Just throwing ideas. How about setting up a consultancy company, getting paid in bitcoin. The company takes a loan and uses bitcoin to pay off that loan. So there is no profit, as the loan eats all the bitcoin earnings. Would you be able to buy a companies car or a motorbike or a yacht or gym equipment or whatever? would you still need to pay taxes? There must be away to avoid CG with crypto, there just has to be a way.
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Honestly, your best bet is to wait and hold on to it. In a few years who knows what could happen. Maybe governments will adopt it and it will become the worlds currency. At that point you won't have to sell your Bitcoin you could directly buy the goods you want with it. This way you get no CG.
I would avoid the schemes you are trying to do. They could work BUT if they find out you would be in trouble :(.
I know how you are feeling. I'm hate paying taxes. The best ways I find is to hold on to your coins (or withdraw a low amount, lower than 5 000$) OR use a bitcoin debit card.
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These fascists wanting to tax something that is really like baseball cards are really crossing the line here. Surely we can open a bank account / cloud currency card, and move the fiat to there......away from the eyes of the tax man. Or simply write a private contract saying I donated all my electronic tokens (which are not money) - to someone down the road....etc.
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