The Canada Revenue Agency (CRA) Tuesday issued a bulletin about digital currencies, such as Bitcoin, noting that tax rules apply equally to transactions in these sorts of virtual currencies.
The CRA says that tax rules apply when digital currency is used to pay for goods or services, under the rules for barter transactions. “A barter transaction occurs when any two persons agree to exchange goods or services and carry out that exchange without using legal currency,” it says.
For example, the CRA says that paying for a movie with digital currency is a barter transaction, and that the value of the movie purchased using digital currency must be included in the seller’s income for tax purposes. The amount to be included would be the value of the movies in Canadian dollars.
In cases where digital currency is bought or sold like a commodity, any resulting gains or losses could be taxable income or capital for the taxpayer, it says.
The agency stresses that not reporting income is illegal. “Canadians should know that the Canada Revenue Agency (CRA) is very active in pursuing cases of non-compliance, in order to ensure that the tax system remains fair for everyone,” it says.