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Canadian Tax Rules 'Apply To Digital Currency'

by Mike Godfrey, Tax-News.com, Washington

13 November 2013


The Canada Revenue Agency (CRA) has clarified that its tax rules for barter transactions apply when digital currency is used to pay for goods or services.

The CRA considers a barter transaction to have taken place when any two people agree to exchange goods or services and carry out that exchange without using legal currency.

For instance, paying for films with digital currency is regarded as a barter transaction. The value of the films purchased must be included in the seller's income for tax purposes. The amount to be included would be the value of the films in Canadian dollars.

The CRA has also noted that digital currency can be bought or sold like a commodity. Any resulting gains or losses could be taxable income for the taxpayer. It has published an interpretation bulletin on this issue, intended to help in determining whether transactions are income or capital in nature.

Finally, the CRA has warned that it is "very active" in pursuing cases of non-compliance, stressing that failure to report income from domestic or foreign sources is illegal. Taxpayers can make use of the CRA's Voluntary Disclosures Program if they wish to correct their tax affairs.

TAGS: compliance | tax | tax compliance | revenue guidance | tax authority | tax planning | Canada | currency | services

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