Canada ONLY: Taxes and law | Bitcointalksearch.org

Herdop

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Menbas

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klondike_bar

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ASIC Wannabe

Quote from: Nhazwrath on December 13, 2020, 08:44:31 PM

I read over this thread and decided to give it a poke since i didn't run across the answer i was looking in to.

Ok so cheapo miner after a month has generated some value currently still sitting on the slush pool.

I am aware of Canadian law dealing with capital gains. That's what i am attempting to avoid in this cycle of what I wish to do with this value.

Is there a Canadian investment company or bank that will accept that value without converting it to capital gains and reinvest it and eventual filter it out through my TFSA?

What I seem to have run in to is that all the banks and investment company's will not accept any outside crypto. they Will deal with crypto if you have bought it from them or one of their ETF's that track the value but it seems to be internal only. I totally understand why.

so the short version of the question external mined crypto converted to something Canadian banks/investment companies trust without having to declare capital gains as step.

First part: No - you couldn't use it to "load" your TFSA. However, you *might* be able to transition from BTC to a BTC-tracking equivalent (such as QBTC or GBTC) in taxed trading accounts, without triggering capital gains/losses at that time. I'm not entirely sure if this would be acceptable to the CRA though. (to my understanding, CRA will not allow you to "lock in" capital losses by selling and re-purchasing an asset - though it may work differently for capital gains?)

Second part: "newly minted" cryptos should be considered some of the "cleanest" coins possible, assuming you can demonstrate that you controlled the mining equipment at the time. I suggest keeping records and bills of sale, especially if you have a larger [5KW+] mining operation; and whether it could be construed as a business [>20kW?] and not simply a profitable hobby).

Steamtyme

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I'm a bit lost on what you are looking for.

First mining rewards are treated the same as gambling at this point not as income. The BTC you hold is subject to capital gains or losses depending on when you convert it to FIAT. One thing to note these are still grey areas, and the BTC you've mined is still in Slushpools possession. So there is a decent chance you have no capital gains as of yet, as the BTC isn't in a wallet you control.

I am not aware of anything in Canada that is offering a way to avoid the capital gains. I haven't looked to much into the funds that have popped up this year, but they seem to be a FIAT investment wit BTC holdings or something along those lines.

Good luck finding what you are looking for

Nhazwrath

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I read over this thread and decided to give it a poke since i didn't run across the answer i was looking in to.

Ok so cheapo miner after a month has generated some value currently still sitting on the slush pool.

I am aware of Canadian law dealing with capital gains. That's what i am attempting to avoid in this cycle of what I wish to do with this value.

Is there a Canadian investment company or bank that will accept that value without converting it to capital gains and reinvest it and eventual filter it out through my TFSA?

What I seem to have run in to is that all the banks and investment company's will not accept any outside crypto. they Will deal with crypto if you have bought it from them or one of their ETF's that track the value but it seems to be internal only. I totally understand why.

so the short version of the question external mined crypto converted to something Canadian banks/investment companies trust without having to declare capital gains as step.

kevin1234a

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Decentralizing Jesus on the Blockchain

funny question dont laugh pls Grin

taxes apply to the value which had been declared as unauthorized by paypal and chargedback already?

spazzdla

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Quote from: spoonmang on April 04, 2014, 07:55:25 PM

Quote from: dunand on April 01, 2014, 09:52:00 PM

Your example is a capital gain.

That's what i thought.

And that's 50% of amount sold added onto your yearly income?
Or is there a bracket of its own for capital gains?

Thanks

I am pretty sure you are correct with 50% of it added to your total income.

So (1000 - 5) / 2 add to yearly income.

kevin1234a

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1) you declare only when you make a sale. If you bought bitcoins in 2013 you dont have to declare then until you sell them. If you sold them in 2015, you would have to declare it on the taxes done in april 2016

2) you are taxed on your income, so yes you will be paying tax. You will pay tax a second time for your capital gains/losses when you sell those bitcoins. Its no different from cashing a paycheck THEN buying bitcoins.
*however, there may be some tax benefits in direct investing from a paycheck - you might be able to cleaim bitcoins as an investment vehicle for your TFSA
[/quote]

if i understood right as long as crypto remains as crypto and cloud remain at cloud we should worry about taxes unless we transfer them into any of the canadian financial institution.

Now what about the online wallets (paypal etc....) funds do we need to declare them too in tax filing?

latest article posted about the legislation of BTC and mining business is bit HEAVY!!!!

thanks guys for the info and updates

zorke

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Quote from: klondike_bar on September 09, 2014, 05:59:16 AM

Quote from: kevin1234a on September 08, 2014, 05:28:21 PM

Read whole thread still having few questions:

If we trade BTC or hash power of various cloud mining with different wallets (paypal/okpay..) and never incash money from those wallets to canadian bank accounts; do we still have to declare it to CRA?
Nb: rmbr i mentioned paypal / ok pay wallets who can provide all monetary transactions to govt.

Second question if we do invest our monthly savings in btc with cavirtex does it mean that we are liable to pay tax on that invested amount ? Though govt already charged taxes before money reached to our bank accounts?

Most of the guys here they discussed about miners where hardware is involved but i didnt get much info about my queries so posting for any info

1) you declare only when you make a sale. If you bought bitcoins in 2013 you dont have to declare then until you sell them. If you sold them in 2015, you would have to declare it on the taxes done in april 2016

2) you are taxed on your income, so yes you will be paying tax. You will pay tax a second time for your capital gains/losses when you sell those bitcoins. Its no different from cashing a paycheck THEN buying bitcoins.
*however, there may be some tax benefits in direct investing from a paycheck - you might be able to cleaim bitcoins as an investment vehicle for your TFSA

I wouldn't think that the fact that you are paid in bitcoin would affect your ability to invest in bitcoin via a TFSA. I believe that you simply need to have an TFSA account set up at an institution and have the financial institution invest the money in products they offer.

The only way that I can think of to invest in this kind of tax advantaged account would be to invest in the BTC EFT when it starts trading or to invest in 2nd markets bitcoin investment trust

wh00per

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http://www.duhaimelaw.com/2014/06/22/canada-implements-worlds-first-national-bitcoin-law/

Since it came after the April posts .. here it is.

I never bought coins. I only mined .. with expenses for miners, electricity etc.

How do you declare those bitcoins when you cash them out?

klondike_bar

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ASIC Wannabe

Quote from: kevin1234a on September 08, 2014, 05:28:21 PM

Read whole thread still having few questions:

If we trade BTC or hash power of various cloud mining with different wallets (paypal/okpay..) and never incash money from those wallets to canadian bank accounts; do we still have to declare it to CRA?
Nb: rmbr i mentioned paypal / ok pay wallets who can provide all monetary transactions to govt.

Second question if we do invest our monthly savings in btc with cavirtex does it mean that we are liable to pay tax on that invested amount ? Though govt already charged taxes before money reached to our bank accounts?

Most of the guys here they discussed about miners where hardware is involved but i didnt get much info about my queries so posting for any info

1) you declare only when you make a sale. If you bought bitcoins in 2013 you dont have to declare then until you sell them. If you sold them in 2015, you would have to declare it on the taxes done in april 2016

2) you are taxed on your income, so yes you will be paying tax. You will pay tax a second time for your capital gains/losses when you sell those bitcoins. Its no different from cashing a paycheck THEN buying bitcoins.
*however, there may be some tax benefits in direct investing from a paycheck - you might be able to cleaim bitcoins as an investment vehicle for your TFSA

kevin1234a

legendary

Activity: 1162

Merit: 1000

Decentralizing Jesus on the Blockchain

Read whole thread still having few questions:

If we trade BTC or hash power of various cloud mining with different wallets (paypal/okpay..) and never incash money from those wallets to canadian bank accounts; do we still have to declare it to CRA?
Nb: rmbr i mentioned paypal / ok pay wallets who can provide all monetary transactions to govt.

Second question if we do invest our monthly savings in btc with cavirtex does it mean that we are liable to pay tax on that invested amount ? Though govt already charged taxes before money reached to our bank accounts?

Most of the guys here they discussed about miners where hardware is involved but i didnt get much info about my queries so posting for any info

OlliBrandt80

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Canadians are so lucky with their goverment! I wish I was a citizen of Canada

tacotime

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I will publish some simple software to calculate capital gains and income from mining soon, for both the US and Canada. Hopefully it'll help someone, and someone will help me get bugs out of it.

Ann Bradshaw Byrne

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Good idea to revive this topic

dunand

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Quote from: ?? on ??

Could you please explain why it is a capital gain and note income. Also, what if it was traded a few times in and out of CAD on cavirtex over that time period, as opposed to 1 purchase and 1 sale. Would the base gain in valuation of the btc be capital and the difference in gains from trading be income? Would it all still be capital or is it all now income? All in your opinion only of course. I'm currently looking for an accountant who has some understanding of btc, but want to see what people here think and how they deal with it.

If you traded several times you will need to calculate the adjusted cost base of your bitcoins on each trade to calculate the capital gain (or loss).
http://www.cra-arc.gc.ca/E/pub/tg/t4037/t4037-e.html#P1185_82580

If you are interested I made a python script to calculate the capital gain for trades on cavirtex. https://bitcointalksearch.org/topic/canada-capital-gain-for-your-tax-return-for-your-trades-on-cavirtex-550294

CoinDaddy

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Basically the Canadian Govt. has wiped their hands of Bitcoin, saying it isn't currency.
All they want is their piece if it is used to cash out or make a purchase.
So if you buy something online, they expect the appropriate taxes to be levied by the online retailer, or upon entry to the country at customs.

Quote

"When bitcoins are bought or sold like a commodity, any resulting gains or losses could be income or capital for the taxpayer depending on the specific facts," ruled the CRA.

That section is covered in paragraphs nine through 32 of the CRA's section IT-479R, Transactions in Securities, "which provide general comments for purposes of determining whether transactions are income or capital in nature."

So if you bought $100 worth of BTC and it's currently worth $200, you don't pay anything.

However if you cashed it out at $200, THEN you would have to pay income tax on the $100 you made.

If you had taken that extra $100, and reinvested it in bitcoin, buying $200 worth of bitcoin from that initial "win" off the $100 buy-in plus the initial $100, then the value goes up to $300, then you have to pay taxes on the $100 gain. So in the end, you pay taxes on $200 because that is how much you "made."

So, CRA only cares if you cash out, and they consider the income to be capital if you're trading and income if you're mining.
End of story... for now.
Harper and other Governments are afraid of Bitcoin. Must be bankers whispering in their ears.

http://business.financialpost.com/2014/02/11/federal-budget-2014-puts-bitcoin-in-cross-hairs-with-new-anti-money-laundering-regulations-for-virtual-currencies/

spoonmang

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Quote from: dunand on April 01, 2014, 09:52:00 PM

Your example is a capital gain.

That's what i thought.

And that's 50% of amount sold added onto your yearly income?
Or is there a bracket of its own for capital gains?

Thanks

dunand

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Your example is a capital gain.

spoonmang

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Quote from: arfeniel on March 22, 2014, 01:50:47 AM

This is old news now but : http://news.gc.ca/web/article-en.do?nid=787789

Also, for those living in Québec, Canada : http://www.lautorite.qc.ca/en/press-releases-2014-autre.html_2014_alert-bitcoin.html

I tried reading that... it hurt my brain.

Lets say i bought 1 BTC in June of 2012 for $5, i then sold that 1 BTC in dec of 2013 for $1000.

Is that a capital gain or an income gain?

arfeniel

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This is old news now but : http://news.gc.ca/web/article-en.do?nid=787789

Also, for those living in Québec, Canada : http://www.lautorite.qc.ca/en/press-releases-2014-autre.html_2014_alert-bitcoin.html

work2heat

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Can we get some info on the regulatory environment for bitcoin ATMs in Canada? If it's just CAD in, BTC out, and if bitcoin is still not considered 'real money' (and hence not under FINTRAC), is it just like selling any other good for dollars?

Prolifik

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I refuse to pay taxes on my Bitcoin. Government can't do anything about it.
I also refuse to use & carry ID. Shaw internet is awesome in Canada I can sign up for internet service with the name Jimmy Bobbins If I want too.

klondike_bar

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ASIC Wannabe

reviving this thread for its usefulness and to see what's changed.

I want to start a miner collective (co-op?) and expect that to do it on a larger scale will mean that tax records become a necessity.

any advice on how that would be done? can any costs be deducted (miner costs, electricity, etc) and would it fall under capital gains for [mining income-costs]-[hardware cost]?

additionally, if someone invested 10BTC with me to basically buy and host miners on thier behalf, how would that work? capital gains for them and then I am taxed on any profit I make? what about hardware costs or resale value?

dunand

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What do you think about declaring capital gain from bitcoin trading as a "Listed personal property"?

LPP is a type of personal-use property. The principal difference between LPP and other personal-use properties is that LPP usually increases in
value over time. LPP consists of any print, etching, drawing, painting, sculpture, or other similar work of art, jewellery, rare folio, rare manuscript, rare book, stamp or coin. In the case of LPP, losses can be applied to reduce gains on the sale of other LPP.

http://www.cra-arc.gc.ca/E/pub/tg/t4037/t4037-12e.pdf (look for the definition at page 7)

nbtcminer

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Any update on this?

Brunic

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Quote from: ArticMine on November 20, 2012, 09:40:47 PM

The problem here is to determine the fair market value for tax purposes for a deemed acquisition or disposition of property, and this is not a problem unique to Bitcoin. In fact Bitcoin is in comparison very simple. Ever had to deal with the tax of an estate and have to determine what the price of a piece of real estate was a year ago or in one case 20 years ago? I had.

The reality is one has to make an estimate that is reasonable and that one can justify. Furthermore it has to be applied consistently. In my real estate example I obtained an appraisal. Would another appraiser be out by 9% especially in the 20 year old case?. Possibly, but the point is I have the documentation and can justify the valuation as being reasonable.

So in the BTC example if liquidity is a concern then using the MtGox BTC / USD rate and multiplying it by the Forex USD / CAD rate is reasonable so is using the Virtex price. I would use the last price at the time of receiving the income as opposed to the bid or ask price and of course be consistent. Are they going to differ by a few percent of course but one must also keep in mind that this is self correcting. If one over estimates the cost of the BTC by say 9% then upon sale that capital gain will be 9% less or the capital loss will be 9% greater.

The bottom line is it is way better to be out by 9% on a deemed acquisition with a reasonable and justifiable valuation than to be out 100% by not declaring the income at all. I would put myself in the position of the income tax auditor here. Which file would I rather audit? The one where I have to argue that a deemed acquisition is off by a few percent and the taxpayer acted in good faith or the one where the taxpayer failed to report a whole lot of income? Let us keep in mind I can only audit one of the two files and I am measured on my performance by how much additional tax revenue and penalty revenue I bring in today, not a few years down the road.

I would bring your example and calculations to a tax professional. Trust me there is a very high chance they have seen this issue before and on an asset way less liquid than Bitcoin.

I am not a lawyer, accountant or other financial advisor and this should not be construed as legal, accounting or financial advice.

That's an interesting view. I've talked a little to my accountant about that, we're planning to make a meeting soon to discuss this matter more. We'll see what come from this.

Thanks for your time.

ArticMine

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Quote from: Brunic on November 20, 2012, 04:16:31 PM

Quote from: ArticMine on November 20, 2012, 03:09:22 PM

Yes but what happens if one simply does not sell for years or even decades then one defers the income and payment of the corresponding tax for years or decades and the CRA is not going to be happy at all. The procedure I use is to treat income earned in BTC for tax purposes at the BTC / CAD rate when the income is earned. If the BTC are subsequently sold afterward the difference is a treated as a capital gain or loss.

So for example let us say I earn 25 BTC on December 30th 2012 and the BTC / CAD rate is $12 then the income declared for tax purposes is 300 CAD. I am also deemed to have acquired the 25 BTC for 300 CAD which will affect the adjusted cost base of all my BTC.

Now let us say in 2013 I sell 25 BTC for say 600 CAD. Let us also say my adjusted cost base for BTC is say 10 CAD per BTC. This would lead to a capital gain of 350 CAD (600-25*10). If on the other hand my BTC adjusted cost base is say 30 CAD per BTC then I would have a capital loss of 150 CAD (600-25*30).

It is the same treatment one would use if one was paid in a foreign currency or in kind as barter. This can get real interesting when one trades on MtGox since one is dealing with both the BTC / USD rate and the USD / CAD rate; however the principle is the same with two steps involved.

I am not a lawyer, accountant or other financial advisor and this should not be construed as legal, accounting or financial advice.

It's another way to calculate it, but my problem is, we're using a BTC / CAD rate that have really small volume and with a huge spread. It's not rare to see spread of 30, 50 cents. Also, if you sell your mining production, you affect the price, and you can change it a lot. If I mine and sell 500 BTC right now, I have thoses prices on Virtex:
Bid = 10.80
Ask = 11.37

If you use the ask price:
11.37 x 500 = 5685$
If you use the bid price:
10.80 x 500 = 5400$

Which one do you use? Also, if I would sell in the real world those 500 BTC, the price drop more. Here's the depth:
10.80   345 (3)   345   3726
10.75   31 (1)   376   4063
10.67   9 (1)   385   4156
10.65   10 (1)   395   426
10.60   359 (2)   754   8064

But also, since the price moves so much, maybe by the moment I mine those BTC, I discover I mined and I check the price, the rate have moved a lot more. If I mine them at 10.80$, but I was busy today and the price dropped to 10.25$ when I looked at it, do I have to use the 10.80$ or the 10.25$ price? We're not talking about a couple of cents of margin error, it's about a couple of hundred dollars of difference.

And no, I'm not interested in using Mt. Gox rate for that, since I'm not going to sell them for USD. As for using their CAD rates, it gets better. Right now, it is at 11.69$. So, for the BTC I'm mining right now, my choice of rate is from 10.80$ at one location to 11.69$ at another location. It's almost a 1$ difference, or a 9.2% difference. Go try to make a 9.2% error on your income tax to see how it goes.

Without rules, tools or advice, it's pretty hard to figure it out on our own.

Quote

Yes but what happens if one simply does not sell for years or even decades then one defers the income and payment of the corresponding tax for years or decades and the CRA is not going to be happy at all.

Well, they will still sell them one day. And at that point, the BTC value risk to be higher than is it currently. If the CRA would come and tell us "hey guys, we saw that you're doing Bitcoin and it's great. Here the rules about how to do all the calculation of the income tax", I would be the first in line to apply those rules. But it seems they don't care at the moment, and I can't invent rules myself. I'm not paid to do their job, so I'm using the simplest way to manage all this and use my time to work on more important things.

*EDIT*
Forgot the disclaimer:
I am not a lawyer, accountant or other financial advisor and this should not be construed as legal, accounting or financial advice.

The problem here is to determine the fair market value for tax purposes for a deemed acquisition or disposition of property, and this is not a problem unique to Bitcoin. In fact Bitcoin is in comparison very simple. Ever had to deal with the tax of an estate and have to determine what the price of a piece of real estate was a year ago or in one case 20 years ago? I had.

The reality is one has to make an estimate that is reasonable and that one can justify. Furthermore it has to be applied consistently. In my real estate example I obtained an appraisal. Would another appraiser be out by 9% especially in the 20 year old case?. Possibly, but the point is I have the documentation and can justify the valuation as being reasonable.

So in the BTC example if liquidity is a concern then using the MtGox BTC / USD rate and multiplying it by the Forex USD / CAD rate is reasonable so is using the Virtex price. I would use the last price at the time of receiving the income as opposed to the bid or ask price and of course be consistent. Are they going to differ by a few percent of course but one must also keep in mind that this is self correcting. If one over estimates the cost of the BTC by say 9% then upon sale that capital gain will be 9% less or the capital loss will be 9% greater.

The bottom line is it is way better to be out by 9% on a deemed acquisition with a reasonable and justifiable valuation than to be out 100% by not declaring the income at all. I would put myself in the position of the income tax auditor here. Which file would I rather audit? The one where I have to argue that a deemed acquisition is off by a few percent and the taxpayer acted in good faith or the one where the taxpayer failed to report a whole lot of income? Let us keep in mind I can only audit one of the two files and I am measured on my performance by how much additional tax revenue and penalty revenue I bring in today, not a few years down the road.

I would bring your example and calculations to a tax professional. Trust me there is a very high chance they have seen this issue before and on an asset way less liquid than Bitcoin.

I am not a lawyer, accountant or other financial advisor and this should not be construed as legal, accounting or financial advice.

Brunic

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Activity: 632

Merit: 500

Quote from: ArticMine on November 20, 2012, 03:09:22 PM

Yes but what happens if one simply does not sell for years or even decades then one defers the income and payment of the corresponding tax for years or decades and the CRA is not going to be happy at all. The procedure I use is to treat income earned in BTC for tax purposes at the BTC / CAD rate when the income is earned. If the BTC are subsequently sold afterward the difference is a treated as a capital gain or loss.

So for example let us say I earn 25 BTC on December 30th 2012 and the BTC / CAD rate is $12 then the income declared for tax purposes is 300 CAD. I am also deemed to have acquired the 25 BTC for 300 CAD which will affect the adjusted cost base of all my BTC.

Now let us say in 2013 I sell 25 BTC for say 600 CAD. Let us also say my adjusted cost base for BTC is say 10 CAD per BTC. This would lead to a capital gain of 350 CAD (600-25*10). If on the other hand my BTC adjusted cost base is say 30 CAD per BTC then I would have a capital loss of 150 CAD (600-25*30).

It is the same treatment one would use if one was paid in a foreign currency or in kind as barter. This can get real interesting when one trades on MtGox since one is dealing with both the BTC / USD rate and the USD / CAD rate; however the principle is the same with two steps involved.

I am not a lawyer, accountant or other financial advisor and this should not be construed as legal, accounting or financial advice.

It's another way to calculate it, but my problem is, we're using a BTC / CAD rate that have really small volume and with a huge spread. It's not rare to see spread of 30, 50 cents. Also, if you sell your mining production, you affect the price, and you can change it a lot. If I mine and sell 500 BTC right now, I have thoses prices on Virtex:
Bid = 10.80
Ask = 11.37

If you use the ask price:
11.37 x 500 = 5685$
If you use the bid price:
10.80 x 500 = 5400$

Which one do you use? Also, if I would sell in the real world those 500 BTC, the price drop more. Here's the depth:
10.80   345 (3)   345   3726
10.75   31 (1)   376   4063
10.67   9 (1)   385   4156
10.65   10 (1)   395   426
10.60   359 (2)   754   8064

But also, since the price moves so much, maybe by the moment I mine those BTC, I discover I mined and I check the price, the rate have moved a lot more. If I mine them at 10.80$, but I was busy today and the price dropped to 10.25$ when I looked at it, do I have to use the 10.80$ or the 10.25$ price? We're not talking about a couple of cents of margin error, it's about a couple of hundred dollars of difference.

And no, I'm not interested in using Mt. Gox rate for that, since I'm not going to sell them for USD. As for using their CAD rates, it gets better. Right now, it is at 11.69$. So, for the BTC I'm mining right now, my choice of rate is from 10.80$ at one location to 11.69$ at another location. It's almost a 1$ difference, or a 9.2% difference. Go try to make a 9.2% error on your income tax to see how it goes.

Without rules, tools or advice, it's pretty hard to figure it out on our own.

Quote

Yes but what happens if one simply does not sell for years or even decades then one defers the income and payment of the corresponding tax for years or decades and the CRA is not going to be happy at all.

Well, they will still sell them one day. And at that point, the BTC value risk to be higher than is it currently. If the CRA would come and tell us "hey guys, we saw that you're doing Bitcoin and it's great. Here the rules about how to do all the calculation of the income tax", I would be the first in line to apply those rules. But it seems they don't care at the moment, and I can't invent rules myself. I'm not paid to do their job, so I'm using the simplest way to manage all this and use my time to work on more important things.

*EDIT*
Forgot the disclaimer:
I am not a lawyer, accountant or other financial advisor and this should not be construed as legal, accounting or financial advice.

ArticMine

legendary

Activity: 2282

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Monero Core Team

Quote from: Brunic on November 19, 2012, 09:04:57 PM

Quote from: ArticMine on November 19, 2012, 06:13:13 PM

Let us keep it simple. Let us say you mine 25 BTC on December 30, 2012 and sell those BTC on January 03, 2013. For the sake of argument let us assume the BTC / CAD rate is the same when you mine the BTC and when you sell the BTC. What year do you declare the income 2012 or 2013?

I go with bobitza on that. I would use the moment when you sell and go with 2013. When you sell, you tend to maximize your profit, so it's the most logical valuation of your income in that period of time. There's also no guarantee you mined those coins on december 30. Maybe you mined them 3 months ago, when the price was at 10$, but use the December 30 date because the BTC price dropped at 4$ at that moment. If you would declare your income based on the moment you got the coins, people would tend to minimize their income (use the lowest prices). With the selling moment, you tend to maximize your profit, so make more money, pay more taxes and make government happy.

Consider it's my personal advice, and I'm no lawyer, financial advisor or nothing like that.

Yes but what happens if one simply does not sell for years or even decades then one defers the income and payment of the corresponding tax for years or decades and the CRA is not going to be happy at all. The procedure I use is to treat income earned in BTC for tax purposes at the BTC / CAD rate when the income is earned. If the BTC are subsequently sold afterward the difference is a treated as a capital gain or loss.

So for example let us say I earn 25 BTC on December 30th 2012 and the BTC / CAD rate is $12 then the income declared for tax purposes is 300 CAD. I am also deemed to have acquired the 25 BTC for 300 CAD which will affect the adjusted cost base of all my BTC.

Now let us say in 2013 I sell 25 BTC for say 600 CAD. Let us also say my adjusted cost base for BTC is say 10 CAD per BTC. This would lead to a capital gain of 350 CAD (600-25*10). If on the other hand my BTC adjusted cost base is say 30 CAD per BTC then I would have a capital loss of 150 CAD (600-25*30).

It is the same treatment one would use if one was paid in a foreign currency or in kind as barter. This can get real interesting when one trades on MtGox since one is dealing with both the BTC / USD rate and the USD / CAD rate; however the principle is the same with two steps involved.

I am not a lawyer, accountant or other financial advisor and this should not be construed as legal, accounting or financial advice.

Brunic

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Quote from: ArticMine on November 19, 2012, 06:13:13 PM

Let us keep it simple. Let us say you mine 25 BTC on December 30, 2012 and sell those BTC on January 03, 2013. For the sake of argument let us assume the BTC / CAD rate is the same when you mine the BTC and when you sell the BTC. What year do you declare the income 2012 or 2013?

I go with bobitza on that. I would use the moment when you sell and go with 2013. When you sell, you tend to maximize your profit, so it's the most logical valuation of your income in that period of time. There's also no guarantee you mined those coins on december 30. Maybe you mined them 3 months ago, when the price was at 10$, but use the December 30 date because the BTC price dropped at 4$ at that moment. If you would declare your income based on the moment you got the coins, people would tend to minimize their income (use the lowest prices). With the selling moment, you tend to maximize your profit, so make more money, pay more taxes and make government happy.

Consider it's my personal advice, and I'm no lawyer, financial advisor or nothing like that.

bobitza

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I think the revenue should be declared when realized. In your example, in 2013.

ArticMine

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Quote from: Brunic on October 30, 2012, 06:05:02 PM

I see BTC like hockey cards. If you buy a hockey card package and you get a Mario Lemieux rookie platinum card that is worth 3000$, I don't see how you have to declare that income, since you never had income in the first place, only a hockey card that you bought 2$ that some people value at 3000$.

But, if you sell your Mario Lemieux rookie card for 3000$, now you have income that you have to declare.

Quote from: bobitza on October 30, 2012, 05:53:40 PM

Quote from: Brunic on October 30, 2012, 03:59:44 PM

So, for those living in Quebec, Canada, mining is a hobby in the government eyes until something new comes out. Since I'm a freelancer, I'm looking into putting that revenue with my "Travailleur Autonome"(autonomous worker?) status.

Merci pour l'info.

Now about BTC as cash in hand ... would you basically report the value of your BTC deposits in CAD when doing a Balance statement? I wouldn't agree with that because:

- BTC is not actually cash in hand, you have to find an exchange to trade it in CAD in large amounts without crashing the price.
- there are big price fluctuations, so your BTC reserve can be valued at 10k or 20k; that will impact your profit and loss and it shouldn't.

I declare what is in CAD. If there was a column where I could declare my BTC I would, but there's nothing for that. And I'm not going to declare the theorical CAD of my BTC, since it's that value only in theory. If, when I mine a BTC, is at 12$ on the market, but when I go to sell it, it's now at 9.50$, I get 9.50$, not 12$.

Let us keep it simple. Let us say you mine 25 BTC on December 30, 2012 and sell those BTC on January 03, 2013. For the sake of argument let us assume the BTC / CAD rate is the same when you mine the BTC and when you sell the BTC. What year do you declare the income 2012 or 2013?

jl2035

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There are many ways to avoid taxes...

Brunic

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I see BTC like hockey cards. If you buy a hockey card package and you get a Mario Lemieux rookie platinum card that is worth 3000$, I don't see how you have to declare that income, since you never had income in the first place, only a hockey card that you bought 2$ that some people value at 3000$.

But, if you sell your Mario Lemieux rookie card for 3000$, now you have income that you have to declare.

Quote from: bobitza on October 30, 2012, 05:53:40 PM

Quote from: Brunic on October 30, 2012, 03:59:44 PM

So, for those living in Quebec, Canada, mining is a hobby in the government eyes until something new comes out. Since I'm a freelancer, I'm looking into putting that revenue with my "Travailleur Autonome"(autonomous worker?) status.

Merci pour l'info.

Now about BTC as cash in hand ... would you basically report the value of your BTC deposits in CAD when doing a Balance statement? I wouldn't agree with that because:

- BTC is not actually cash in hand, you have to find an exchange to trade it in CAD in large amounts without crashing the price.
- there are big price fluctuations, so your BTC reserve can be valued at 10k or 20k; that will impact your profit and loss and it shouldn't.

I declare what is in CAD. If there was a column where I could declare my BTC I would, but there's nothing for that. And I'm not going to declare the theorical CAD of my BTC, since it's that value only in theory. If, when I mine a BTC, is at 12$ on the market, but when I go to sell it, it's now at 9.50$, I get 9.50$, not 12$.

bobitza

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Quote from: Brunic on October 30, 2012, 03:59:44 PM

So, for those living in Quebec, Canada, mining is a hobby in the government eyes until something new comes out. Since I'm a freelancer, I'm looking into putting that revenue with my "Travailleur Autonome"(autonomous worker?) status.

Merci pour l'info.

Now about BTC as cash in hand ... would you basically report the value of your BTC deposits in CAD when doing a Balance statement? I wouldn't agree with that because:

- BTC is not actually cash in hand, you have to find an exchange to trade it in CAD in large amounts without crashing the price.
- there are big price fluctuations, so your BTC reserve can be valued at 10k or 20k; that will impact your profit and loss and it shouldn't.

Epoch

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Keep in mind that any activity that generates income falls under Federal jurisdiction, not just provincial. And, according to the Canada Revenue Agency, all income (with only a few very specific exemptions) must be declared on your Federal (and provincial) Income Tax return.

Even if that activity is 'just a hobby', it is considered as business income in the government's eyes:

http://sbinfocanada.about.com/cs/taxinfo/f/hobbybiz.htm

Basically you must report the money you make from your hobby as business income by completing Form T2125. One grey area, stemming from there being no governmental directive on the status of BTC (whether it is to be treated as a commodity or a currency, or something else), is how to report BTC retained as BTC (rather than converting BTC to fiat).

But if you convert most of your mined BTC into fiat, it is straightforward to report. One benefit from reporting it is that it lets you make certain deductions (depreciation of your mining hardware, and electricity costs being two useful deductions). You would not be able to do this if you did not declare your mining income.

Brunic

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Good idea to revive this topic, I wanted to add something about mining.

I went to my local CLD (a government agency for business) and asked them about mining. They told me after research that Bitcoin is in a legal gray zone and that mining is not considered a business in their eyes, but mainly a hobby. I told them I was making a 4-digit number per month and they still told me that it was a hobby.

So, for those living in Quebec, Canada, mining is a hobby in the government eyes until something new comes out. Since I'm a freelancer, I'm looking into putting that revenue with my "Travailleur Autonome"(autonomous worker?) status.

From what I can see, there's no perfect way to solve that matter, since government are always fucking late with technology. But my take is that all the CAD money you made selling Bitcoins should be declared in a way or another. It should cover you from being bit in the ass later on. As for declaring the Bitcoin mined but not cashed out, well, if they make the legal framework for that, I'll be glad to do so, but in the meantime, there's no sane way of doing that.

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Quote from: bobitza on October 16, 2012, 01:50:29 PM

Quote from: Stephen Gornick on May 02, 2012, 11:44:15 PM

Quote from: Epoch on May 02, 2012, 05:01:53 PM

if you are mining BTC and leave it as BTC it is not taxable because it is unrealized income. It only becomes taxable when you convert it to fiat (or trade it for something).

So let's say year 1 the miner (operating as a business) invests $2,000 CAD into hardware, and by the end of the year has 200 BTC and electric consumption of $600 CAD to generate those BTCs.

Then in year 2 the BTCs are sold (not sure of Canada has the distinction of short-term vs. long-term capital gain, assume all BTCs were held 1 year after mined).

Would electricity be deducted in year 1? If so those BTCs would need to sit on the books as an asset somewhere then, right? Heh, ... inventory?

Sorry for reviving an old topic but I found this relevant as I'm contemplating starting a "real" mining company.

I find the mix of BTC and CAD denominated assets confusing when making a balance sheet for the company. Like Stephen said, are the BTC kept as inventory?

What if you decide to give the BTC away as bond payments or dividends? How will those actions affect the way you state your net income?

BTC is the same as having cash on hand, not inventory. It is just another currency, the same as if you were using USD and CAD.

bobitza

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Quote from: Stephen Gornick on May 02, 2012, 11:44:15 PM

Quote from: Epoch on May 02, 2012, 05:01:53 PM

if you are mining BTC and leave it as BTC it is not taxable because it is unrealized income. It only becomes taxable when you convert it to fiat (or trade it for something).

So let's say year 1 the miner (operating as a business) invests $2,000 CAD into hardware, and by the end of the year has 200 BTC and electric consumption of $600 CAD to generate those BTCs.

Then in year 2 the BTCs are sold (not sure of Canada has the distinction of short-term vs. long-term capital gain, assume all BTCs were held 1 year after mined).

Would electricity be deducted in year 1? If so those BTCs would need to sit on the books as an asset somewhere then, right? Heh, ... inventory?

Sorry for reviving an old topic but I found this relevant as I'm contemplating starting a "real" mining company.

I find the mix of BTC and CAD denominated assets confusing when making a balance sheet for the company. Like Stephen said, are the BTC kept as inventory?

What if you decide to give the BTC away as bond payments or dividends? How will those actions affect the way you state your net income?

ArticMine

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Quote from: Gabi on May 16, 2012, 02:56:23 PM

...

The point is, if 500 million isk is worth 10$ and if it's taxable then every eve player should pay taxes while he play but of course we know this is not true

No. It does not matter how the gamer is compensated, namely isk or BTC, or CAD, etc., but rather is the gamer a professional (taxable) or not (not taxable)? Here is an article on the case of poker players and the taxation of poker winnings:http://taxdood.com/2011/03/07/taxation-of-gambling-winnings-in-canada/ What matters here is whether the player is a professional or not. What the pot is denominated in is totally irrelevant.

By the way CCP can add "Income Tax Auditor" to the EVE Sandbox

Gabi

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If you want to walk on water, get out of the boat

Let's ignore the eula, i too know it's worthless vs the law

The point is, if 500 million isk is worth 10$ and if it's taxable then every eve player should pay taxes while he play but of course we know this is not true

ArticMine

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If there is a market there is a fair market value quite irrespective of what some EULA may say. Furthermore I have yet to come across a EULA that would override the Income Tax Act in a court of law.

Now to get back on topic. Bitcoins and Namecoins are traded on exchanges worldwide and one can easily establish a fair market value for them in terms of CAD at any point in time.

Gabi

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If you want to walk on water, get out of the boat

But gold and isk have no fair market value, the eula clearly state that everything ingame is owned by the software house, so technically you own 0 gold and 0 isk, you just use them ingame.
Sure, people trade 10$ for 500 millions isk outside of the game but as i said this is against the rules, if i pay a service in isk and i pay no taxes, how can the government decide how much taxes i have to pay?

ArticMine

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Quote from: Gabi on May 15, 2012, 12:19:53 PM

Let's speak about WoW gold or EVE isk

I can sell 500millions of isk for like 2BTC or for like 10$ or more. Yes it is a bit against the eula and the EVE rules but not against any law.

So when i run some missions ingame and i gain isk do i have to pay real taxes on them?

Well i say that the answer also apply for bitcoin. If i mine bitcoin i pay no taxes, i'll pay taxes the day i'll sell them/i buy something with them (even if buying things with btc can be tought like barter, well barter is taxed)

I am not a Lawyer or an Accountant, this is just how I see it.

Let us say you provided a service to someone (say fix their computer) and they pay you in WoW gold or EVE isk. Is this taxable? You bet it is at the fair market value of the WoW or EVE isk when you were paid for the service. And if you are registered for the GST / HST you would have also to charge them the GST / HST in WoW gold or EVE isk and submit the CAD equivalent to the CRA. The gaming example is more interesting. If the fair market value of the WoW gold or EVE isk is less that what you paid to participate in the game then the argument can be that all you did is reduce the cost of your entertainment since the primary purpose of the gaming was entertainment. On the other hand if the fair market value of the WoW gold or EVE isk is more than what your cost of participating in the game then yes it is taxable. Let us not forget that there are people who make a good income by gaming and then selling the gaming currency and the taxwoman will want her cut.

Fuzzy

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Quote from: Gabi on May 15, 2012, 12:19:53 PM

Let's speak about WoW gold or EVE isk

I can sell 500millions of isk for like 2BTC or for like 10$ or more. Yes it is a bit against the eula and the EVE rules but not against any law.

So when i run some missions ingame and i gain isk do i have to pay real taxes on them?

Well i say that the answer also apply for bitcoin. If i mine bitcoin i pay no taxes, i'll pay taxes the day i'll sell them/i buy something with them (even if buying things with btc can be tought like barter, well barter is taxed)

The Government always wants a slice.

Pro Tip: Do NOT try to f%#& the government out of their (fair or unfair) share. Like a violent pimp, they do not mess around when it comes to getting paid.

Gabi

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If you want to walk on water, get out of the boat

Let's speak about WoW gold or EVE isk

I can sell 500millions of isk for like 2BTC or for like 10$ or more. Yes it is a bit against the eula and the EVE rules but not against any law.

So when i run some missions ingame and i gain isk do i have to pay real taxes on them?

Well i say that the answer also apply for bitcoin. If i mine bitcoin i pay no taxes, i'll pay taxes the day i'll sell them/i buy something with them (even if buying things with btc can be tought like barter, well barter is taxed)

ArticMine

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First I must say that I am not a Lawyer or an Accountant. I am only sharing what I do for both Bitcoin / Namecoin mining and trading.

Bitcoin / Namecoin mining. The value in CAD of the Bitcoins or Namecoins is taken as income when they are mined at the market exchange rate regardless of whether they are subsequently sold or not. This value is the same that is used as the cost to determine the adjusted cost base of the Bitcoins or Namecoins. One can also use an average value for the exchange rate as the CRA will likely accept any reasonable approach applied on a consistent basis.

Are Bitcoins or Namecoins "money" or a "commodity"? For Bitcoins the case for money is very good in particular with respect to section 123 of the Excise Tax Act http://laws-lois.justice.gc.ca/eng/acts/E-15/page-94.html#h-71

Quote

“money”

« argent »

“money” includes any currency, cheque, promissory note, letter of credit, draft, traveller’s cheque, bill of exchange, postal note, money order, postal remittance and other similar instrument, whether Canadian or foreign, but does not include currency the fair market value of which exceeds its stated value as legal tender in the country of issuance or currency that is supplied or held for its numismatic value;

This means treating any increase or decrease in value on disposition as a capital gain or loss and there being no GST/HST on the sale of Bitcoins in Canada.

For Namecoins on the other hand I would argue for a commodity. In this case GST/HST would have to be charged in Canada for a sale and one can elect to have any increase or decrease in value on disposition treated as capital gain or loss.

Are mining costs deductible? This really comes down to whether the mining operation is a hobby or business? If it is the former no. If it is the latter then yes. The electricity cost would be deductible (although if the "waste" heat from the mining is used to heat a residence in winter a CRA auditor could argue this). It should also be possible to depreciate the equipment etc.

Epoch

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Quote from: Stephen Gornick on May 02, 2012, 11:44:15 PM

Quote from: Epoch on May 02, 2012, 05:01:53 PM

if you are mining BTC and leave it as BTC it is not taxable because it is unrealized income. It only becomes taxable when you convert it to fiat (or trade it for something).

So let's say year 1 the miner (operating as a business) invests $2,000 CAD into hardware, and by the end of the year has 200 BTC and electric consumption of $600 CAD to generate those BTCs.

Then in year 2 the BTCs are sold (not sure of Canada has the distinction of short-term vs. long-term capital gain, assume all BTCs were held 1 year after mined).

Would electricity be deducted in year 1? If so those BTCs would need to sit on the books as an asset somewhere then, right? Heh, ... inventory?

That's certainly an interesting (and not unreasonable) scenario you describe. I don't believe I can answer that with any confidence. Lips sealed

Stephen Gornick

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Quote from: Epoch on May 02, 2012, 05:01:53 PM

if you are mining BTC and leave it as BTC it is not taxable because it is unrealized income. It only becomes taxable when you convert it to fiat (or trade it for something).

So let's say year 1 the miner (operating as a business) invests $2,000 CAD into hardware, and by the end of the year has 200 BTC and electric consumption of $600 CAD to generate those BTCs.

Then in year 2 the BTCs are sold (not sure of Canada has the distinction of short-term vs. long-term capital gain, assume all BTCs were held 1 year after mined).

Would electricity be deducted in year 1? If so those BTCs would need to sit on the books as an asset somewhere then, right? Heh, ... inventory?

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Quote from: Epoch on May 02, 2012, 05:01:53 PM

Quote from: BladeMcCool on May 02, 2012, 04:49:49 PM

IMO, the burden of proof lies on RCA to prove a) Bitcoins exist. b) I ever actually got any. c) That I currently control any d) That I actually have the passphrase required to re-title them to another address. If they can't prove those 4 things in court, then I fail to see how I could be liable for a damn thing.

There is little point in pursuing this argument much further, because it clearly is everyone's personal choice how they treat BTC income/gains for income tax purposes, but I would suggest you familiarize yourself with the Canadian Income Tax Act available on the CRA website. The legal definition of 'income' for purposes of reporting is clearly spelled out; it is not a question of 'opinion'.

When you get audited and are asked to explain where the extra $2k or $5k or $10k came from that magically appeared in your bank account for which you have no record or T4 slip, think back to this thread.

Of course the above mainly concerns miners and only applies if you are converting mined BTC into currency; if you are mining BTC and leave it as BTC it is not taxable because it is unrealized income. It only becomes taxable when you convert it to fiat (or trade it for something).

If you buy BTC with your own money, sit on it for 6 months, and it appreciates in value by 50%, you are not taxed on that 50% until you actually sell the BTC. It is akin to capital gains on a stock; the gains are not taxed until you sell the stock.

Ok so, what you are saying here is, that by selling BTC for CAD and then attaching my SIN number to it by depositing it in my bank account, I'm now in RCAs jurisdiction. Or something like that. So basically you would need to cash out using a means that does not attach your SIN number to it? Like sell BTC->Gold (coinabul)->CAD (pawn shop?) ... So it sounds like I'm going to have a fun time when this finally comes to a head. I'll probably get jailed for contempt anyway when I insist on videorecording the proceedings. Lol. Oh well.

Epoch

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Quote from: BladeMcCool on May 02, 2012, 04:49:49 PM

IMO, the burden of proof lies on RCA to prove a) Bitcoins exist. b) I ever actually got any. c) That I currently control any d) That I actually have the passphrase required to re-title them to another address. If they can't prove those 4 things in court, then I fail to see how I could be liable for a damn thing.

There is little point in pursuing this argument much further, because it clearly is everyone's personal choice how they treat BTC income/gains for income tax purposes, but I would suggest you familiarize yourself with the Canadian Income Tax Act available on the CRA website. The legal definition of 'income' for purposes of reporting is clearly spelled out; it is not a question of 'opinion'.

When you get audited and are asked to explain where the extra $2k or $5k or $10k came from that magically appeared in your bank account for which you have no record or T4 slip, think back to this thread.

Of course the above mainly concerns miners and only applies if you are converting mined BTC into currency; if you are mining BTC and leave it as BTC it is not taxable because it is unrealized income. It only becomes taxable when you convert it to fiat (or trade it for something).

If you buy BTC with your own money, sit on it for 6 months, and it appreciates in value by 50%, you are not taxed on that 50% until you actually sell the BTC. It is akin to capital gains on a stock; the gains are not taxed until you sell the stock.

BladeMcCool

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IMO, the burden of proof lies on RCA to prove a) Bitcoins exist. b) I ever actually got any. c) That I currently control any d) That I actually have the passphrase required to re-title them to another address. If they can't prove those 4 things in court, then I fail to see how I could be liable for a damn thing.

Epoch

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Quote from: mc_lovin on May 02, 2012, 03:04:21 PM

I claimed bitcoin on my tax return! I am a legit miner now!!

edit: and I'm Canadian, too. The tax representative at H&R Block was thinking bitcoin is some sort of financial gain, he was thinking it was like trading stock but I told him it was money generated from thin air from mining, so almost like mining for gold and selling the gold to an exchange. I claimed like $4000 worth which is appropriate for the tax bracket.

I'm also feelin' the cold winter nights and low electricity bills, I think it's like 5.9c / kWh over here in Winnipeg, MB, not as cheap as you but still makes for profitable mining!

Whether mined BTC is converted to CAD, or traded for services, it is considered as income and should be reported on an income tax filing. You handled this correctly, whether the H&R rep was technically correct about bitcoin or not.

In return for reporting your income, the Canadian government grants you the right to claim various reasonable and necessary expenses associated with the generation of that income. Namely, you can deduct the depreciation of your mining hardware (there is a formula for that; you cannot claim the full amount immediately) and the associated electricity costs. Those will be your two main claimable expenses.

BTW: your Winnipeg residential rate is exactly $6.62c/kWh plus a provincial tax of 14.5% for a total charge of 7.58c/kWh. There will be a rate hike shortly.

mc_lovin

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www.bitcointrading.com

I claimed bitcoin on my tax return! I am a legit miner now!!

edit: and I'm Canadian, too. The tax representative at H&R Block was thinking bitcoin is some sort of financial gain, he was thinking it was like trading stock but I told him it was money generated from thin air from mining, so almost like mining for gold and selling the gold to an exchange. I claimed like $4000 worth which is appropriate for the tax bracket.

I'm also feelin' the cold winter nights and low electricity bills, I think it's like 5.9c / kWh over here in Winnipeg, MB, not as cheap as you but still makes for profitable mining!

ColdHardMetal

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Quote from: Fuzzy on May 02, 2012, 08:05:43 AM

I was told by an accountant that technically, your BTC are an investment, you pay taxes once you realize that investment by turning it into CAD dollars, and that is counted as income.

Doesn't matter if it's CAD. Once you realize a gain it's liable to taxation. You may need to go through of step of converting the transaction into CAD terms based on the rates at the time, or the official average rate of the year, but realizing the gain in not CAD doesn't exempt you from taxation. It's the same as if you sell your house for USD and make a gain on the sale, you're still liable for tax on the gain.

Quote from: Fuzzy on May 02, 2012, 08:05:43 AM

You can however deduct hardware depreciation if you bought mining hardware.

Depending on how you're filing, possibly. I expect that would be easier if you're filing as a business rather than if you're filing personally, but possibly in both cases.

Quote from: Fuzzy on May 02, 2012, 08:05:43 AM

None of that is technically accurate, so you'll need to talk to a tax person either way.

Most certainly that.

Quote from: foggyb on May 02, 2012, 10:46:22 AM

What if you purchase goods and services with bitcoins?

Doesn't really matter. You would need to convert the transaction into CAD terms and determine if you made a gain on it.

Merely as an observation, and not as advice in any way, shape, or form, but this is probably one of those spots where you could slip one past the goalie.

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What if you purchase goods and services with bitcoins?

Fuzzy

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I was told by an accountant that technically, your BTC are an investment, you pay taxes once you realize that investment by turning it into CAD dollars, and that is counted as income. You can however deduct hardware depreciation if you bought mining hardware.

None of that is technically accurate, so you'll need to talk to a tax person either way.

Stephen Gornick

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Quote from: Brunic on April 18, 2012, 02:43:20 PM

I'll be looking in that legal matter soon, probably next month,

I've updated the wiki article to have a section for Jurisdictions. Please share what you've learned.
- http://en.bitcoin.it/wiki/Tax_compliance#Jurisdictions

Brunic

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I've read a little the forums here, but it's all about the US. It gives a guideline, but it's not the real law for us in Canada. Any Canadians around here who have legal informations about Bitcoins? If so, please come tell us that it's a lot better than in the US Grin

I'll be looking in that legal matter soon, probably next month, when I'll have a little more time. I run a mining operation that's getting somewhat big, and I want more details about the legal side of all this.

I'm interested in making Bitcoin mining a legitimate business around here. With the winter and Hydro-Québec, it's like paradise over here for mining Grin

Hope I get big like Alcan and enjoy the 2.95 cents/kwh or have my own dam. Grin

Topic: Canada ONLY: Taxes and law (Read 13553 times)