Guide to Crypto Tax in Canada (2023 CRA Rules)

The Canada Revenue Agency (CRA) treats cryptocurrency as property, gains from which are taxed either as business income or capital gains under income tax rates. 

Establishing whether or not your transactions are part of a business is essential: while 50% of capital gains are taxable, 100% of business income is taxable. In this guide, we outline how both categories are reported and taxed, and answer common questions about Crypto tax in Canada.

Canada has no short- or long-term capital gains tax rates. Rather, crypto capital gains in Canada are taxed at the same rate as Federal Income Tax and Provincial Income Tax. Note you’ll only pay tax on 50% of your total capital gains as an individual crypto holder. Professional (day) traders will pay 100%.

Taxes for all provinces and territories (except Quebec) are calculated the same way as federal tax. Here are the 2022 income tax packages with rates for each province and territory.

Disposing of crypto, such as selling it, trading it for another crypto, or using it for purchases, triggers capital gains tax in Canada. Ordinary income tax is applicable when you earn cryptocurrency, determined by the fair market value of your crypto at the time you receive it. Earnings from activities like staking and mining rewards fall under this category. 

For Canadian taxpayers, 50% of your capital gains and 100% of your ordinary income obtained from cryptocurrency are considered taxable income in Canada. Canadian taxpayers may use up to 50% of crypto capital losses to offset capital gains.

Yes. Although crypto offers a degree of anonymity, the Canadian government has the capability to trace crypto transactions. To ensure compliance, cryptocurrency exchanges are mandated to report transactions exceeding $10,000 to the Canada Revenue Agency (CRA). 

If your transactions do not surpass this threshold, crypto exchanges in Canada are obligated to gather customer information and may be required to disclose this data upon request. The best approach is to assume the CRA has full transparency into your crypto activity, and thoroughly report your crypto transactions to remain compliant. Our expert team is available to assist and ensure you remain compliant this and every tax season.

The CRA administers tax laws for the Government of Canada and for most provinces and territories, and regulates crypto tax in Canada.

“Any income from transactions involving cryptocurrency is generally treated as business income or as a capital gain, depending on the circumstances. Similarly, if earnings qualify as business income or as a capital gain then any losses are treated as business losses or capital losses.”
- CRA

Income tax brackets in Canada

As noted, crypto capital gains in Canada are taxed at the same rate as Federal Income Tax and Provincial Income Tax, so the above table applies to both income and capital gains from crypto.

For 2022, the tax-free federal basic personal amount was $14,398 (for taxpayers with a net income of $155,625 or less). For 2023, the federal basic personal amount has increased to $15,000 (for taxpayers with a net income of $165,430 or less). Note that each province and territory also sets a basic personal tax credit amount.

In Canada, crypto is taxed as a commodity and considered either business income or capital gains. Canadian taxpayers are not obligated to pay taxes for buying or holding cryptocurrency but are subject to capital gains or business income taxes for crypto sales, mining, or other crypto-related proceeds.

Whether or not your transactions are considered part of a business is essential, as 50% of capital gains are taxable and 100% of business income is taxable.

Crypto is not considered legal tender in Canada, which means when you use it to pay for goods or services it’s considered a barter transaction, with corresponding tax consequences. So when Canadian taxpayers receive goods or services in exchange for crypto, they will have a capital gain or loss on the spent crypto’s change in value since they acquired it.

The first step to calculating your crypto taxes in Canada is to determine whether you’ll pay taxes on 50% of your capital gains or 100% in the case of professional trading or crypto sales as part of a business. In most cases, 50% of gains from buying crypto and later selling it for profit is subject to taxes.

The Canada cost basis method explained

The CRA stipulates that taxpayers must employ the adjusted cost basis method to calculate crypto capital gains and losses. This method considers the cost of the asset along with any associated fees. 

To determine your cost basis, you may use either the fair market value (FMV) of the asset at the time of acquisition or the FMV at the year's end - opting for the lower value. To comply with these regulations, it is essential to maintain accurate records of your crypto transactions.

Investors with a variety of assets may choose to value their entire inventory based on its FMV at the year's end. When dealing with multiple assets, the CRA emphasizes using the average cost basis method, which incorporates the superficial loss rule. Learn more about how crypto losses are taxed in Canada.

Canada crypto taxes for professional traders

How is crypto taxed in Canada for professional traders? In Canada, professional (day) traders are subject to taxes on business income. Accordingly, you will not be able to use the 50% capital gains rate on any profits from professional trading. Instead, 100% of all profits will be taxed as business income based on the fair market value at the time of receipt.

Here are crypto transactions that trigger no taxable event in Canada.

• Simply purchasing and holding crypto with fiat.

• Receiving crypto as a gift.

• Moving crypto between wallets you own.

• Created a Decentralized Autonomous Organization (DAO).

Here’s a brief overview of how to report crypto taxes in Canada for 2023.

• Canadian taxpayers should file crypto taxes as part of their annual Income Tax Return.

• Canadian taxpayers are expected to file and list all capital gains from crypto sales in the income portion of their taxes. 

• Canadians are expected to use adjusted cost basis (or average cost) to calculate capital gains. This means you must average the cost of your purchases in the case of identical properties when making your capital gains calculations.

• Canadian taxpayers may offset capital losses from sales of cryptocurrency. You cannot offset losses from other sources by means of crypto - for instance, if you earn less in your employment income than you may have anticipated. Per the CRA, “You can use a net capital loss to reduce your taxable capital gain in any of the three preceding years or in any future year.”

• It’s critical to keep a thorough record of all your crypto transactions across wallets, exchanges, and platforms for accurate crypto tax reporting. When in doubt, our expert team at TokenTax can assist.

Here’s a look at common crypto tax filing forms in Canada for 2023.

• In most cases, Canadian taxpayers file their capital gains from crypto with a Schedule 3 - Capital Gains form. 

• Business crypto transactions are subject to income tax and should be reported with Form T2125.

• If you're a Canadian resident taxpayer who holds crypto outside of the country, you must file Form T1135 with CRA if the total cost of your specified foreign property (including cryptocurrency) is more than $100,000.

Long-term crypto trades

Canada does not tax crypto based on the duration of your holdings, so whether you trade short- or long-term will not impact your tax obligations. There is no tax to simply hold cryptocurrency as a Canadian taxpayer. 

This means you could, for example, wait to recognize profits during a low-income year and pay less taxes than you might otherwise. You can also use losses on crypto trades to offset taxable capital gains from cryptocurrencies, stocks, and other investments.

Crypto staking, mining, and lending

The CRA acknowledges that crypto staking, mining, or lending can be either a personal activity (i.e. a hobby) or a business activity and evaluates cases on an individual basis. However, the CRA has indicated that it considers most mining and staking operations to be business activities and subject to business income tax.

Mined crypto is generally not taxable at the time of receipt. However, when you sell your mined tokens, the usual tax rules for capital gains or business income apply. Calculate the capital gain/loss by subtracting the zero cost basis from the full market value of the crypto on the date of disposition.

Tax professionals like ours at TokenTax can help you determine how your staking, mining, or lending income should be classified.

Utility tokens

The CRA has not issued specific guidance around various forms of cryptocurrency, but any gains from the disposition of tokens are taxed as either business income or capital gains. It’s important to keep a record of all your crypto transactions, whatever their purpose, so you can make a full accounting of your acquisitions and any gains or losses from sales.

Crypto as payment for goods and services

Canada considers the use of crypto to purchase goods or services to be a barter transaction. As such, when someone receives goods or services in exchange for crypto, they will have a capital gain or loss on the spent asset's change in value since they acquired it.

There are a number of ways to reduce your crypto tax obligations in Canada.

• Hold your crypto. If you don’t sell, you aren’t subject to gains.

• Take profits in a low-income year.

• Loss harvest. You can use 50% of the value of capital losses to offset taxable capital gains from cryptocurrencies, stocks, and other investments.

• Make a tax-deductible donation. Most Canadian taxpayers receive tax credits of 15% for the first $200 of donations and 29% for donations over this amount.

• Use a TFSA/RRSP. For the 2023 tax year, the Tax Free Savings Account contribution limit is $6,500. The Registered Retirement Saving Plan contribution is whichever is lower: 18% of your earned income in the previous year or $30,780. All contributions are tax-deductible, although withdrawals are subject to income tax.

How to cash out crypto without paying taxes in Canada

Crypto taxes in Canada are unavoidable. There are some ways to minimize your tax obligations, however. Here are some legal options to do so:

• Simply hold: Avoid selling, spending, or gifting your crypto to maintain tax-free status. By holding onto your assets, you can avoid paying taxes on them.

• Leverage crypto ETFs: Invest in ETFs that track the performance of cryptocurrencies without directly owning the assets, avoiding the need to store them in a wallet.

• Utilize a registered retirement plan: Hold most crypto ETFs in your TFSA or RRSP to eliminate or defer taxes until a later date, potentially benefiting from a lower tax bracket after retirement.

• Act as an individual investor: Avoid promoting products or services related to crypto and refrain from investing for commercial purposes to be taxed as an individual investor rather than a professional, resulting in lower taxes on capital gains.

• Use crypto losses to offset gains: Thoroughly track and use losses from underperforming crypto to offset gains, reducing the overall tax liability and potentially paying for past and future taxes.

If you need assistance to calculate your Canada crypto tax, look no further than TokenTax. We are both a comprehensive crypto tax calculation software platform and a full-service crypto tax accounting firm.

With TokenTax, when it’s time to calculate your taxes, you simply import data from every crypto exchange, blockchain, protocol, and wallet and easily sync your transactions via API or upload them in a supported CSV format. 

TokenTax takes the challenges out of your crypto tax Canada filing and guarantees both accuracy and thoroughness. And if you have questions or doubts about your crypto tax in Canada, our experts will be glad to assist.

Business crypto transactions are subject to income and not capital gains tax. This means that 100% of profit is subject to taxation. Business income is reported on Form T2125.

The Canadian corporate income tax is 38% of taxable income. However, after a federal tax abatement for income earned within Canada, it is 28%. Some types of businesses receive additional preferential tax treatment. For example, small businesses are taxed at 9%.

For businesses that do not receive other preferential tax treatment, there is a general tax reduction that brings the rate to 13%. However, although provinces use the federal rate as a guide, they may change the maximum rate. For example, while the maximum rate on Prince Edward Island is 16%, in Ontario, it is only 11.5%.

Day trading: Business income

Example: You derive the majority of your income from cryptocurrency day trading. In the last tax year, you sold $400,000 worth of crypto for $100,000 of profit. Your full $100,000 profit would be subject to income tax.

Mining and staking: Business income (usually)

The CRA acknowledges that crypto mining or staking can be either a personal activity, i.e. a hobby, or a business activity and evaluates cases on an individual basis. However, the CRA has indicated that it considers most mining and staking operations to be business activities and subject to business income tax.

Valuing cryptocurrency as inventory

If cryptocurrency is considered inventory for your business, Canada requires you to value it consistently each year. The CRA describes the following two methods of inventory valuation:

• Value each item in inventory at its cost when acquired or at its current FMV, whichever is lower.

• Value the entire inventory at FMV at the end of each year.

However, Canada requires that inventory involved in an “adventure or concern in the nature of trade” must be valued at cost. For more guidance on how to value cryptocurrency inventory, contact a crypto tax specialist.

Here are some common answers to frequently asked questions about Canada crypto tax, do you get taxed on crypto in Canada, how is crypto taxed in Canada, and how much is crypto taxed in Canada.

Is crypto income taxable in Canada?

Yes, crypto income is taxable in Canada. CRA treats cryptocurrency as property, and gains from crypto transactions are subject to taxation. The tax treatment depends on whether the transactions are considered part of a business or capital gains. While 50% of capital gains are taxable, 100% of business income is subject to taxation. The CRA has specific guidelines for crypto income categories.

For more detailed information on crypto taxes in Canada and to ensure accurate compliance, it's advisable to consult with crypto tax professionals and use specialized crypto tax software like ours at TokenTax. Additionally, staying informed about changes in tax regulations and reporting requirements is crucial for crypto investors in Canada.

When will you pay tax on crypto in Canada?

The payment deadline for taxes in Canada for most taxpayers is April 30. If you or your spouse or common-law partner are self-employed, the deadline is June 15.

When is the tax deadline in Canada?

The tax deadline is the same as the payment deadline: April 30 for most taxpayers, and June 15 if you or your spouse or common-law partner are self-employed.

What happens if I don't file my cryptocurrency taxes in Canada?

In Canada, you’re charged a late filing penalty if you have a balance owing and file your tax return late. You may also be subject to a federal and provincial or territorial penalty if you fail to report an amount of $500 or more.

Is Bitcoin taxable in Canada?

Yes, Bitcoin is taxable in Canada as are other cryptocurrency transactions. If received as ordinary income or part of professional or business activity, 100% is taxable. If disposed of for capital gains, 50% of the proceeds are taxable.

How are crypto-to-crypto trades taxed in Canada?

Crypto-to-crypto trades in Canada trigger a taxable event based on the fair market value of the assets swapped at the time of the transaction. If you swap appreciated crypto for a stablecoin, for example, you’ll be expected to pay capital gains on the value of appreciation of the crypto you’ve swapped.

How is lost and stolen cryptocurrency taxed in Canada?

There is no specific guidance regarding lost or stolen crypto in Canada. The CRA does allow taxpayers to deduct capital losses due to theft of other capital property, so Canadian taxpayers may be able to claim a capital loss.