Information for crypto-asset users and tax professionals

Since 2008, the crypto-asset industry has seen a dramatic expansion of asset types, technology, and scale. Due to the evolving nature of the underlying technology and the increase in use of crypto-assets, the Canada Revenue Agency (CRA) will continue to update its tax guidance as needed.

This webpage provides general tax information for the most common tax issues related to crypto-assets. You will also find links to more technical content provided by the CRA.

Crypto-assets

The descriptions below reference terms as they are commonly understood in the crypto-asset industry and are provided for information purposes only. The CRA is not expressing any opinion or position by presenting this information.

Keeping books and records

If you have acquired or disposed of crypto-assets, you have to keep adequate books and records to support each transaction. This applies to individuals and businesses.

You should keep records of the following information for your crypto-asset transactions:

• The number of units and type of crypto-asset for each transaction
• The date and time of each transaction
• The value of the crypto-asset (in Canadian dollars) at the time of each transaction
• A description of the nature of each transaction and the other party to the transaction (even if it is just their crypto-asset address)
• The addresses associated with each digital wallet used
• The beginning wallet balance (and its cost) and ending wallet balance for each crypto-asset for each year

You should also keep receipts associated with managing your tax affairs, such as accounting and legal costs, and third-party software costs. Different types of software are available to track cryptocurrency trades and keep records. The CRA does not endorse any particular software, so choose the software that you prefer for record keeping.

If any transactions occur on a crypto-asset exchange, you should keep exchange records including trade ledgers (buy, sell and swaps), transfer ledgers (deposit and withdrawals of crypto-assets and fiat) and records supporting any other types of transactions that took place on the exchange. Crypto-asset exchanges have different standards for the kinds of records they keep and how long they keep them. 

In certain situations, the CRA may require you to keep additional documentation. For example, if you perform crypto-asset mining activities, you should also keep the following records:

• Receipts for the purchase of hardware related to your mining activities
• Receipts for expenses incurred and other records related to your mining operation (such as power costs, mining pool fees, hardware specifications, maintenance costs, and hardware operation time)
• Records supporting each mining pool arrangement (such as legal agreements) along with exported records of your mining activity within each pool

For more information, visit Keeping records.

Determining the value of a crypto-asset

To report correct amounts on your tax returns, you need to determine the value of a crypto-asset when a transaction occurs. You must also keep enough documentation, as part of your books and records, to support the value of your crypto-assets and any related amounts you report on your tax returns (such as income/loss or capital gain/capital loss).

Here are some examples of events or transactions where you need to determine the value of your crypto-assets for tax reporting purposes:

Generally, the CRA will accept a crypto-asset’s fair market value for tax reporting purposes.

In all cases, you must use a reasonable method for determining the value of your crypto-assets, even when a direct value is not readily available. Whichever method you choose, use it consistently and keep a record of how it was used to calculate a value. For example, you could choose an exchange rate taken from the same exchange broker you are using or an average of high/low/open/close values across a number of high-volume exchange brokers to determine the value.

If you hold more than one type of crypto-asset, each type is considered to be a separate asset and must be valued separately.

Whatever valuation method you use, you must be able to show that it is reasonable for tax reporting purposes.

Income tax considerations

The following sections outline the income tax implications of common transactions involving crypto-assets.

Basic concepts

In some instances, a transaction involving a crypto-asset may result in business income (or loss) or a capital gain (or loss). It is important for you to establish if the crypto-asset transactions in which you were involved have resulted in income or capital gains, as this determination will lead to different income tax outcomes. More guidance on this question is given below.

Disposition

Generally, a disposition of a crypto-asset may occur when you do any of the following:

• Trade or exchange it for government-issued currency or another type of crypto-asset
• Use it to buy goods or services
• Transfer ownership of it by way of gift or donation

Other situations not listed above may also result in a disposition and may potentially have income tax consequences.

Using cryptocurrency to pay for goods and services is a common example of the disposition of a crypto-asset. Since cryptocurrency is not government-issued currency, using cryptocurrency as payment for goods or services is treated as a barter transaction for income tax purposes. A barter transaction occurs when two parties exchange goods or services and carry out that exchange without using government-issued currency. Generally, you are considered to have disposed of cryptocurrency if you use it to pay for goods or services from a vendor. On the other hand, the vendor must include in their income the value of the goods or services provided or the value of the cryptocurrency accepted as payment, whichever is more readily valued. For more information, see our archived content on barter transactions.

Business income or capital gain

When you dispose of a crypto-asset, the resulting gain (or loss) may be considered business income (or loss) or a capital gain (or loss).

Paragraphs 9 to 13 of Interpretation Bulletin IT-479R, Transactions In Securities, provide general information to help you determine if your securities transactions are made on account of business income or capital. The information in these paragraphs may be relevant in determining whether your crypto-asset transactions are on account of income or capital depending on the nature of those assets. However, you should keep in mind that this does not mean that crypto-assets are necessarily securities (for example, shares and bonds) for income tax purposes.

As stated in Interpretation Bulletin IT-479R, you are generally considered to be carrying on a business if your course of conduct indicates that you are disposing of crypto-assets in a way capable of producing gains, with that object in view, and the transactions are carried out in a manner similar to a trader or dealer in securities. The following factors may indicate that you are carrying on a business:

• Frequency of transactions – you have a history of extensive buying and selling of crypto-assets
• Period of ownership – you hold your crypto-assets for a short period of time, and you turn them over quickly
• Knowledge of crypto-asset markets – you have knowledge of, or experience in, crypto-asset markets
• Time spent – you spend a substantial part of your time studying crypto-asset markets
• Financing – you finance your crypto-asset purchases by some form of debt
• Advertising – you advertise that you are willing to buy crypto-assets

For more details, see Interpretation Bulletin IT-479R. Although none of the individual factors above may be enough to characterize your activities as a business, the combination of a number of those factors may well be enough. Whether you are carrying on a business or not must be determined case by case.

You are generally considered to be carrying on a business if you conduct business activities with regularity or continuity. However, even an isolated crypto-asset transaction could be on account of business income when it is considered “an adventure or concern in the nature of trade.” For more information, see our archived content on an adventure or concern in the nature of trade.

If a crypto-asset transaction was not made on account of business income, it would generally be considered capital in nature.

Reporting your business income (or loss)

If you have disposed a crypto-asset on account of business income, you must report the full amount of your profits (or loss) from the disposition in your tax return.

For more information on business income, including from the disposition of a crypto-asset, see Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.

Reporting your capital gain (or loss)

If the disposition of a crypto-asset was on account of capital, and the proceeds of disposition (usually the sale price of the crypto-asset) are more than your adjusted cost base (usually the cost of a crypto-asset, plus expenses to acquire it) and the outlays and expenses incurred to make the disposition, then you have realized a capital gain. If the amount for the proceeds of disposition of the crypto-asset is less than the adjusted cost base and the outlays and expenses, then you have realized a capital loss.

You must include half of your capital gains (known as taxable capital gains) in your income for the year. Similarly, you are allowed to deduct half of your capital losses (known as allowable capital losses) but only against your taxable capital gain; that is, you cannot deduct your allowable capital losses against income from other sources, such as employment income. Generally, if your allowable capital losses are more than taxable capital gains in a year, the difference is added to your net capital losses, which can be applied against taxable capital gains of other years. To offset taxable capital gains, you can carry back three years or carry forward indefinitely any net capital losses.

For more information on proceeds of disposition, adjusted cost base, and capital gains and losses, including from the disposition of a crypto-asset, see Guide T4037, Capital Gains.

Determining inventory value

If you hold crypto-assets as business inventory, you need to know the value and cost of the crypto-assets described in the inventory of your business in order to determine the amount of business income or loss that you realized. Generally, you use one of the following two methods of valuing inventory consistently from year to year:

• Value each item in the inventory at the cost when it was acquired or its fair market value at the end of the year, whichever is lower
• Value the entire inventory at its fair market value at the end of the year

You may have to use other methods of valuing inventory, depending on the type of business you have. For example, property described in the inventory of a business that is an adventure or concern in the nature of trade must be valued at the cost for which you acquired the property.

For more information about determining the value of inventory for tax purposes, including the special rules for an adventure in the nature of trade, review our archived content on Inventory valuation.

Earning crypto-assets through proof-of-work mining

Proof-of-work mining commonly involves using specialized computers to solve complicated mathematical problems to validate crypto-asset transactions. Miners put crypto-asset transactions into blocks and try to guess a number that will create a valid block. A valid block is accepted by the corresponding crypto-asset’s network and becomes part of a publicly distributed ledger, usually a blockchain. When a miner successfully creates a valid block, they will generally receive two payments. One payment represents newly created crypto-assets on the network, and the other represents the fees from transactions included in the newly validated block. Those who perform these mining processes are paid with crypto-assets.

If you are in the business of crypto-asset mining, the value of the crypto-assets you receive for your mining activities must be included in your business income at the time it is earned. Generally, if you do your mining activity with the intention of profiting in a business-like manner, you would be carrying on a business with respect to that activity.

Crypto-asset mining equipment

If you own crypto-asset mining equipment like application-specific integrated circuit (ASIC) miners or graphics processing unit (GPU) mining rigs that you use in your crypto-asset mining business, you may be able to claim a deduction of capital cost allowance (CCA) for the equipment. Although each piece of equipment is different, the CRA considers that ASIC miners and GPU mining rigs can meet the conditions to fall within CCA class 50. For more information on claiming CCA, visit our web page Claiming Capital Cost Allowance.

Non-residents

If you are a non-resident of Canada and use crypto-asset mining equipment located in Canada to mine crypto-assets, you may be carrying on a business in Canada and have to file a tax return in Canada. You may also be considered to have a permanent establishment in Canada under an applicable income tax treaty concluded by Canada. For more information on the taxation of non-residents in Canada, read Guide T4058, Non-Residents and Income Tax 2022.

Applying GST/HST to cryptocurrency

Where a taxable property or service is exchanged for cryptocurrency, the GST/HST that applies to the property or service is calculated based on the fair market value of the cryptocurrency at the time of the exchange.

If your business accepts cryptocurrency as payment for taxable property or services, the value of the cryptocurrency for GST/HST purposes is calculated based on its fair market value at the time of the transaction.

Keep all records that show how you calculated the fair market value.