2013-04-26 CBC - Revenue Canada says BitCoins aren't tax exempt

[impulse]

http://www.cbc.ca/news/business/story/2013/04/26/business-bitcoin-tax.html?cmp=rss

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[aigeezer]

"... the cash value of a BitCoin jumped from under $50 US to above $250 and back earlier this month, as speculators flooded the market after awareness of them grew. They are currently worth about $90."

Must be some other BTC.     

[impulse]

Just thinking about this article a bit, maybe there is a Canadian tax lawyer out there who has an answer to this. If I am interpreting this correctly, than what it is saying is that if I buy $1000 worth of bitcoins and immediately buy a product with them, I am subject to the "barter" tax provision and I owe income tax on $1000, whereas if I used the dollars I would owe nothing, only the merchant would be required to claim the "income". That is pretty fucked up, this needs to be revised in some way or bitcoins can never function in the Canadian system.

[David M]

If I am interpreting this correctly, than what it is saying is that if I buy $1000 worth of bitcoins and immediately buy a product with them, I am subject to the "barter" tax provision and I owe income tax on $1000, whereas if I used the dollars I would owe nothing, only the merchant would be required to claim the "income".

You are reading this wrong. 

I'm Australian, but this appears to be very similar to Australia.  So I will add what my tax/accountant lawyer has told me.

You are not subject to any further taxation with a barter purchase.  It's the same as fiat. 
The government will want the consumption tax (e.g sales tax/VAT/GST whatever) from the merchant.

"we generally consider that the value of whatever is received is at least equal to the value of whatever is given up."

Just because the merchant received bitcoin, does not mean he gained no "value" because it is not fiat.
The merchant declares the fiat equivalent of the transaction and must report it.

From the link..

"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.

Capital gains on your Bitcoin trading will only apply when you cash out to fiat.  This includes losses.


tldr:  Carry on Canada with bitcoins.

[Rodyland]

If I am interpreting this correctly, than what it is saying is that if I buy $1000 worth of bitcoins and immediately buy a product with them, I am subject to the "barter" tax provision and I owe income tax on $1000, whereas if I used the dollars I would owe nothing, only the merchant would be required to claim the "income".

You are reading this wrong. 

I'm Australian, but this appears to be very similar to Australia.  So I will add what my tax/accountant lawyer has told me.

You are not subject to any further taxation with a barter purchase.  It's the same as fiat. 
The government will want the consumption tax (e.g sales tax/VAT/GST whatever) from the merchant.

"we generally consider that the value of whatever is received is at least equal to the value of whatever is given up."

Just because the merchant received bitcoin, does not mean he gained no "value" because it is not fiat.
The merchant declares the fiat equivalent of the transaction and must report it.

From the link..

"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.

Capital gains on your Bitcoin trading will only apply when you cash out to fiat.  This includes losses.


tldr:  Carry on Canada with bitcoins.

Ditto aussie, and IANAA, but personal experience in non-standard tax returns combined with a little common sense says that you aren't just liable for tax when you cash out to fiat - you are also liable for tax when you trade-out.

So, imagine you buy BTC5 for AU$50 ($10 each, back mid last year?)

13 months later you take your BTC5 and buy a nice shiny new US$650 laptop from bitcoinstore.com.

You are now, IMO, liable for a capital gain of $600. 

If your coins were mined then I would guess you're liable income tax of $650, but that's nothing more than my guess.

Of course, I'm wondering if there is there any single one of us out there that can produce accurate records as to which coins where mined/bought when for what price?  Can you choose which coins you use (ie. choose your CGT tax base price) for a given purchase?  Having never actually spent coins on "stuff", I could probably manage it, although some of my purchases were on exchanges that no longer exist....  Untangling that mess to pay tax owed is going to be... challenging, to say the least.

[Adrian-x]

Of course, I'm wondering if there is there any single one of us out there that can produce accurate records as to which coins where mined/bought when for what price?  Can you choose which coins you use (ie. choose your CGT tax base price) for a given purchase?  Having never actually spent coins on "stuff", I could probably manage it, although some of my purchases were on exchanges that no longer exist....  Untangling that mess to pay tax owed is going to be... challenging, to say the least.

No but I think it is simple fiat in and fiat out or barter value in and barter value out, the value of Bitcoin is relevant, it's about the total net flow at the end of the year, I am not sure, but I imagine you only calculate the capital gain or loss when you cash out, so you can never actually declare a capital loss until you have abandoned the Bitcoin economy altogether. At the moment I am somewhat net neutral, my mining equipment is amortised as a company asset, it has produced any realised capital gains, and the money I have invested has been withdrawn, leaving no realised capital gains.

[deepceleron]

"Barter transaction rules apply where BitCoins are used to purchase goods or services," Canada Revenue Agency spokesman Philippe Brideau said in an email."
...
"But as the CRA statement shows, governments are starting to pay attention."

So the reporter emailed for a comment, was pointed to existing 1995 rules, and concludes that governments are "paying attention"?

[aigeezer]

"Barter transaction rules apply where BitCoins are used to purchase goods or services," Canada Revenue Agency spokesman Philippe Brideau said in an email."
...
"But as the CRA statement shows, governments are starting to pay attention."

So the reporter emailed for a comment, was pointed to existing 1995 rules, and concludes that governments are "paying attention"?

I hope you're right, but it might be a bit more subtle than that. The CBC is run by the government and some would say for the government. In another country it might be called "the state-sponsored media". My take on this was that the government is staking a claim (something new?... we'll take a piece of it) by having one of its agents publicly ask another of its agents for an opinion. They'll worry about the rules in due course, and make some up if necessary. Worth keeping an eye on, in other words. Implementation is another matter, of course.

[Piper67]

"Barter transaction rules apply where BitCoins are used to purchase goods or services," Canada Revenue Agency spokesman Philippe Brideau said in an email."
...
"But as the CRA statement shows, governments are starting to pay attention."

So the reporter emailed for a comment, was pointed to existing 1995 rules, and concludes that governments are "paying attention"?

I hope you're right, but it might be a bit more subtle than that. The CBC is run by the government and some would say for the government. In another country it might be called "the state-sponsored media". My take on this was that the government is staking a claim (something new?... we'll take a piece of it) by having one of its agents publicly ask another of its agents for an opinion. They'll worry about the rules in due course, and make some up if necessary. Worth keeping an eye on, in other words. Implementation is another matter, of course.

This is absolutely false. The CBC is a public corporation, but it is neither by the government no for the government. In fact, the CBC has been against the government enough times in its history to make your statement quite ludicrous. Officially, it's an "arms length" corporation. In reality, it has carried about as many anti-government stories as just about any other Canadian news outlet.