HOW BITCOINS CANADA MIGHT AFFECT INCOME TAXES

Bitcoins are all around us and they started to affect our everyday life! Read and discover how Bitcoins Canada might affect income taxes!

Bitcoin is a new e-commerce system which is not operated or controlled by a centralized government authority or other institutions like most currencies. This crypto coin is popular for online transfers and payments because of its security and encryption methods and it has managed to capture the attention of lots of tech-minded and non-traditionalists people. As a matter of fact, Bitcoin has also captured the attention of the Canada Revenue Agency, who has modified current tax codes in order to address transactions and profits associated with virtual currencies.
Transactions and profits made with Bitcoins, Ethereum or other cryptocurrencies which are covered directly by the section of the tax codes that govern trade and exchange transactions. Under this portion, you as a user must declare any transaction made, expenses made or income received, regardless of whether any actual cash was related to the actual transaction.
Here is one example to help you understand what exactly we are talking about – if you run a certain business and you accept Bitcoins or any other type of crypto coins in exchange for your product or services, you are required to report all active transactions on your current income taxes. Since you can’t reveal cryptocurrencies or other similar items on your tax form, you need to declare the typical amount in dollars that you would have otherwise charged for those products or services. For instance, if you charge $200 for online courses, you must declare $200 as your income on your return, regardless of the types of payment you accept. The individual who provided you with the trade may also declare $200 as a cost on their income tax return.
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In some situations, barter rules and regular trade aren’t appropriate. But, if you use Bitcoin or other virtual currency systems to run and operate your business or activities, you are responsible and it is your obligation to claim these payments and purchases on your tax return.
In order to assign dollar amounts for all of these transactions, you need to use the exchange rate between the Canadian dollar and the virtual currency on the day of the transaction.
If you pay an employee using cryptocurrency, you need to convert the payment to Canadian dollars using the exchange rate from the day the transaction or the payment was made. Once it is converted, your employee has to use the exchange rate to establish how much income exactly he should declare.
If you hold, purchase or sell virtual currency and you make a certain profit in this process, please keep in mind that you must claim that profit as your capital gains. You should know that the portion of the tax code of Canada Revenue Agency’s regarding securities exchanges applies to all of these transactions.
Here is one example to understand what we are talking about here –  if you buy 200 Bitcoins for $30.000 and you decide to sell them 6 months later or one year later for $50.000, you need to declare a capital gain of total $20.000.
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We hope this article will help you learn more about Bitcoins Canada, how they work, and how they impact our everyday life or in this case, income taxes. If you have additional questions, please don’t hesitate to ask. It is important to be informed, especially when it comes to Bitcoins. The more information you have, the better for you and for your finances, and, of course, your income taxes.
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