Canada To Tax Bitcoin Transactions

Canada to tax Bitcoin transactions (RT, April 27, 2013):

Canadians using bitcoins, the decentralized crypto-currency that recently went mainstream, must report their incomes and pay taxes as with other earnings, Canada’s Revenue Agency (CRA) confirmed following a media request.

The issue was clarified in response to a letter by the Canadian Broadcasting Corporation (CBC) ahead of the country’s tax season.

Two separate tax rules are applicable to the electronic currency, CRA spokesperson Philippe Brideau told CBC in an email.

When bitcoins are used as money to buy goods and services, the transaction is treated as barter and is taxable as such. When they are traded at a market for profit, they may be taxed as capital gains.

“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,” the CRA ruled.

The Bitcoin community is well aware that governments may soon tax their operations: A Bitcoin wiki page on the issue says taxation depends on jurisdiction, and suggests consulting a professional lawyer or accountant.

The currency was created with the idea of protecting transactions from outside control and shielding the anonymity of users; law enforcers have long eyed Bitcoin as a tool for money laundering and illicit deals.

“The system of tracking money is based on banking,” David D. Stewart, an international tax reporter for Tax Analyst told Business Insider, when the website asked him to explain how bitcoins are taxed in the US. “I could transfer $100,000 worth of bitcoins to someone and no one would know about it really.”

The nature of the currency makes it attractive for would-be tax evaders, whethr motivated by simple greed or the political belief that levying taxes is an act of violence on the part of the government, and should be resisted.

Bitcoin drew mainstream media attention recently when the total value of the currency briefly topped $1 billion, and wild price swings in the Bitcoin market promised a high-risk-high-profit opportunity for traders.

3 thoughts on “Canada To Tax Bitcoin Transactions

  1. 1) Stop using banks.

    2) Ensure you are set up with VPNs and TOR. Why? A virtual private network will help mask your data while online, including the information you are transmitting related to Bitcoin. TOR will help even further. – To obtain TOR, see: https://www.torproject.org/ (Make sure the VPNs you use are ones which do not log your activity or whose logs are so minimal as to be almost meaningless, you will have to inquire as to the provider as to their data logging policy, and make sure you can buy the VPN service in bitcoin.) See http://www.bestvpnservice.com/blog/vpn-providers-with-bitcoins/ for a list of VPN providers, that do accept bitcoin, who you can inquire with about their data logging policy. When you set up your VPN server, it is not recommended that you select a USA server. Ideally, it is recommended that you select one in Czech Republic or Romania, due to data retention laws in those countries that so far have minimized retention of data – for more details on this, see: https://wiki.vorratsdatenspeicherung.de/Transposition

    3) Use a combination of bitcoin, PPcoin, timebank(s), and barter, which is taxed in some areas but which is impossible to monitor.

    4) Stop using banks and the fiat currency they use.

    5) See step 1.

    Doing all of these things, if enough of us do them, governments will not be able to enforce their laws. Technology will outpace the law.
    Perhaps this seems too much to hope for, but it is in fact closer than we all realize.

    Thanks, and have fun.

  2. For those of us who are not that well versed in computers and VPNs, how would we do it? I read your reply, and don’t understand it. How can a bitcoin replace currency?

  3. To Marilyn et. al.,

    Bitcoin is best understood as a decentralized method of exchange which is completely seperate from banks (a currency which does not rely upon, nor is issued by financial institutions, and in fact is collectively created and maintained by its user base). It should not be thought of as a “bank” (a means of storing funds in an electronic account in large amounts) due to its present volatility. Though how much people store in their Bitcoin wallets at any moment, is entirely up to them. It is a personal choice. Bitcoin is a virtual currency best described as a “cryptocurrency” which ultimately has served a purpose beyond any financial transaction possible, which is to say, to provide a mechanism in leading the way to a future where people understand and accept that banks, currencies of fiat, and governments themselves in this whole corporate scheme, are no longer necessary. People of the world will manage affairs collectively.

    The completely decentralized nature of bitcoin means everyone actually owns a part of it — government does not own nor control it, and cannot, due to that the block chain upon which bitcoin is based allows for other virtual currencies to be created based upon this original concept.

    Whether someone has 1 Bitcoin or 0.0000001, this supports a future in which anything is possible.

    The beginnings of your exploration with bitcoin can be seen at http://bitcoin.org/en/how-it-works
    I also recommend viewing the video at https://www.weusecoins.com/en/
    and then clicking on the “Getting Started” tab to view the Bitcoin client you can download for Windows, Mac, or Linux.

    Who “controls” Bitcoin? The answer is everyone, and no-one. Though the detailed answer is a little more complex. Check out this article.
    http://thegenesisblock.com/who-controls-bitcoin-2/

    An interesting recent news story on bitcoin payment systems can be seen at
    http://techcrunch.com/2013/04/28/pay-with-bits-wants-to-be-the-square-for-bitcoin/

    More information on Virtual Private Networks (a means of masking your online activity, which includes bitcoin) can be seen at https://en.wikipedia.org/wiki/Virtual_private_network
    If you are in Canada, check out http://cryptocloud.ca – they say they have supported Bitcoin users since 2011.

    You can buy bitcoins directly through Bitstamp http://bit.ly/11vuCbv or a similar service.

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