CRA confirms its view of bitcoin transactions

Published by Ian Gamble

In 2013-0514701I7, the CRA confirmed that transactions involving bitcoins should be reported as would any other barter transaction. The bitcoin is a virtual currency used to buy and sell goods and services on the Internet. It is not a recognized currency issued by the government of a country; it is a simple commodity. When the bitcoin is used to purchase goods or services, the transaction is treated as a barter transaction: i.e., the value of the thing received is considered to equal the value of the thing given up in exchange. These values must be translated into Canadian dollars (s. 261(2)(b)), and this determines the Canadian tax liability of the parties. Furthermore, as a commodity, an economic gain or loss may arise on the bitcoins themselves. For instance, if the bitcoins are held on capital account, a capital gain or loss would generally be determined as the difference between their Canadian dollar value on the day the bitcoins were acquired and their Canadian dollar value on the day the bitcoins are used in a transaction. Whether bitcoins are held on income account or capital account is a question of fact to be ascertained in the usual manner, having regard to all the circumstances.