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Canada Bitcoin The Almighty Buck

Canada Revenue Agency To Tax BitCoin Transactions 297

Posted by samzenpus
from the show-me-the-money dept.
First time accepted submitter semilemon writes "The Canada Revenue Agency has started paying attention to BitCoin transactions, as it says users will have to pay tax on all transactions using the currency. From the article, "The CRA told the CBC there are two separate tax rules that apply to the electronic currency, depending on whether they are used as money to buy things or if they were merely bought and sold for speculative purposes. "Barter transaction rules apply where BitCoins are used to purchase goods or services," Canada Revenue Agency spokesman Philippe Brideau said in an email. In this situation, that means whatever you've received in exchange for your $1 worth of vegetables must be documented as a taxable gain of at least $1 somewhere. When it comes to trading BitCoins for profit, the tax man says there are tax implications there, too. "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."
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Canada Revenue Agency To Tax BitCoin Transactions

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  • by sg_oneill (159032) on Sunday April 28, 2013 @03:07PM (#43575441)

    All seems reasonable to me. Our civil society is founded on the fact that since the government actually costs money, then people need to pay tax. Trying to hide money in bitcoin ought be seen as tax evasion, unless they are paying taxes on that money.

    Libertarian types trying to sponge off the taxes of hard working tax payers via tax evasion need to stop being so greedy and stealing other peoples money.

    • by synaptik (125) * on Sunday April 28, 2013 @03:13PM (#43575479) Homepage
      I haven't heard any libertarians espousing bitcoin as a means of evading taxes. I just sold mine from 2010, and I am well aware of the need to pay income tax on the net proceeds. Just like anything else.
      • by Cederic (9623) on Sunday April 28, 2013 @04:20PM (#43575905) Journal

        Income tax? Or Capital Gains tax?

        I guess it depends whether you bought them or 'mined' them.

        • by alexander_686 (957440) on Sunday April 28, 2013 @05:10PM (#43576197)

          As given in the summary, it is sales tax (if used to buy things) or capital gains tax (if mined and sold, or speculated in.) Which, I think, would be common sense. In America, at least, you can’t avoid taxes by switching to barter, script, or other currencies – it’s fair market value that drives the underlying tax code.

          • by mysidia (191772)

            it’s fair market value that drives the underlying tax code.

            While it's a great theory for how taxes should be defined. it may be problematic... Suppose, you use X bitcoins to buy a digital product, such as an eBook, that is not for sale by any other means (it is not available to be purchased for USD).

            You have a problem, since the product doesn't have a fair market value that can be uniquely discerned.

            The value of the product is a matter of opinion. Some books are sold brand new for $5, oth

            • by xiando (770382)
              > Unlike with a real currency, there is no market for the bitcoins either. Dude, really? There is something called MtGox out there. There are also other exchanges out there, the big ones are listed here: http://bitcoinity.org/markets/list?currency=ALL&span=24h [bitcoinity.org] The current market value of a Bitcoin is very easy to get, all you have to do is look at the ticker-price and you have it. Saying there is no market when BTC for millions of $USD is traded every hour is kind of ignorant. I'm guessing you ha
            • While it's a great theory for how taxes should be defined. it may be problematic... Suppose, you use X bitcoins to buy a digital product, such as an eBook, that is not for sale by any other means (it is not available to be purchased for USD). You have a problem.

              Well, no, I don’t have a problem – it’s the retailor who has to pay the tax so it is up to the local authority. And in America, these things don’t have sales tax. So the specifics don’t pan out in this case – but let’s take the view of the retailor.

              It’s intangible? So? There is a whole chunk of legal and accounting standards that wrap around this. Has anybody anywhere swapped bitcoins for something else? If yes that gets you a value. It may be a fuzzy value

    • by olip85 (1770514) on Sunday April 28, 2013 @03:20PM (#43575527)

      Good move by the government, and it is a good thing that this is happening sooner rather than later. Yes, taxes suck, yes I want to pay lower taxes, etc, but roads and healthcare don't pay for themselves.

    • Re: (Score:2, Insightful)

      by spire3661 (1038968)
      Please expain to me why the government should get a cut if i transfer money from one human to another. Its insanity to expect a cut from EVERY FINANCIAL transaction. This level of taxation goes FAR BEYOND what it takes to run a nation.
      • Capital Gains (Score:5, Informative)

        by Roger W Moore (538166) on Sunday April 28, 2013 @03:48PM (#43575667) Journal
        It is not every transaction it is just capital gains tax. If you 'mined' BitCoins then the cost was the electricity needed to generate them. If you then sell them for money (or exchange them for goods which have a value) and get more than the cost of mining them then the government taxes you on the capital gain. This is exactly the same as any currency speculation. If BitCoins want to be treated as a real currency then there real tax rules which apply.
        • Re: (Score:2, Interesting)

          by LordLimecat (1103839)

          It was taxed when the power company purchased the equipment and fuel to make the electricity, and again when you purchased the electricity from the power company, and again when you converted it into bitcoins, and again when you purchased some milk with it, and again when the shopkeeper paid his employees with the milk money.

          Its "consistent" for sure, but its ridiculous as well. GP is right, the idea that somehow the Government needs a cut of every transaction (rather than just income tax) is absurd.

          • Re:Capital Gains (Score:4, Informative)

            by Anonymous Coward on Sunday April 28, 2013 @04:35PM (#43576035)

            Most countries (states) have a "single" tax point structure. In the non-progressive states (countries) the tax is delayed until the final customer transaction. In more progressive structures the tax is based on the value added at each stage of the chain. You buy a raw component for $1.00 you get taxed on the $1.00. You added your value and sell it for $5.00 you get taxed on the $4.00 value added. This the basic structure of VAT used inn many countries.

            Therefore, the product is only "taxed" once.

        • by smash (1351)
          If this is the case, then you should be able to claim power consumption costs for bitcoin mining as a tax deduction. Which could alter the profitability of mining.
          • by mysidia (191772)

            then you should be able to claim power consumption costs for bitcoin mining as a tax deduction. Which could alter the profitability of mining.

            Ask an accountant and tax attorney if possible.

            The actual production of bitcoin might itself be taxable, so that the capital gain is only change in value after producing it -- and on production, the bitcoin is immediately taxable in the fair market value of the entire bitcoin value generated. If it is, (which is most likely case), then the electricity consumptio

        • by mysidia (191772)

          It is not every transaction it is just capital gains tax. If you 'mined' BitCoins then the cost was the electricity needed to generate them. I

          Yes... unfortunately, how you figure this electricity cost may be complicated. You have these lumps of X bitcoins, if you trade Y fractions of a bitcoin; you need to allocate a certain electricity cost to every lump of bitcoins you got, and then you have equipment you used for mining, and its depreciation costs.

          It's unlikely that the electricity costs will be

      • by Jawnn (445279) on Sunday April 28, 2013 @03:59PM (#43575763)

        This level of taxation goes FAR BEYOND what it takes to run a nation.

        [citation needed]
        First of all, there is precious little agreement on how much it actually takes to "run a nation", but in the case of the U.S., it is plain to even the most dim-witted that we are not collecting enough to cover that expense. Unless/until we can agree to spend less, more revenue is required. To suggest that it is excessive is to deny reality.

        • by ganjadude (952775)
          the issue is not "covering the expense" it is deciding which expenses need to be cut. Our economy brings in more in each year then we spent per year only a decades ago. there is no excuse that spending levels have gone up to trillion dollar deficits when we still take in more money than only a decade ago. Let me ask you something. has anything gotten better for the rising taxes and government spending? Some will argue for others against of course. I argue that we dont get nearly as much for what our governm
          • by spyfrog (552673) on Sunday April 28, 2013 @04:46PM (#43576093) Homepage

            I thought you were an democracy. So it isn't the federal government who is to blame - it is you the people that continue to vote in people who either doesn't lower spending or raises taxes to balance the budget.
            Blaming it on the federal government is plainly wrong - you Americans simply wants to eat the cookie and keep it. Balancing a budget is easy - either you cut spendings or your raises taxes. Your politicians does neither and you keep voting on them so you should all take the blame.

          • by smash (1351)
            If you cut your military budget down to say, only 2-3 times your largest potential adversary's, and used it for defence rather than empire building, you'd probably be in surplus in no time.
      • The title is misleading. Bitcoin transactions aren't being taxed, as far as I can tell. Sales denominated in bitcoins are subject to VAT (or similar), and government-currency-denominated gains from selling bitcoins for other currency will be taxed. Sending bitcoins from one wallet to another isn't, per se, subject to tax. As far as I can tell.
      • by ScottMcD (1339445)

        The government expects to get a percentage of every transfer of money from one entity (or person) to another. The person receiving the money must count it as income. This is how income tax works. Just because a person decides not to report doesn't mean the tax isn't owed. And if the amount of money is high enough the government will figure out that tax is owed and come after the person to get it.

        In the case of bitcoins (or any other non-local currency) the transaction must be converted to the local curr

        • by CastrTroy (595695)
          Exactly. They had a crackdown on people who made money off eBay a few years back. They obviously didn't go after people who just sold a bicycle on eBay but were more concerned with those running completely undeclared businesses off of eBay, some people making over $100,000 per year. Just like they won't go after people setting up a garage sale but they will expect taxes to be paid when you're running a business, even if you run it out of your home.
      • by mysidia (191772)

        Please expain to me why the government should get a cut if i transfer money from one human to another.

        I don't know, but what does this have to do with bitcoins? The fact is, they tax incomes regardless of source, and regardless of what forms the income takes, as long as there is an increase in value, and (if necessary) an income realization event.

        This level of taxation goes FAR BEYOND what it takes to run a nation.

        Different nations require different cost to run. The US, and other governments thro

    • by Solandri (704621) on Sunday April 28, 2013 @03:53PM (#43575701)

      Libertarian types trying to sponge off the taxes of hard working tax payers via tax evasion need to stop being so greedy and stealing other peoples money.

      It all depends on efficiency.

      - If the tax money collected by the government is spent on a program which yields a higher return (by increasing the nation's productivity) than if the money had remained in private hands, then tax evasion is stealing from other taxpayers.

      - OTOH if the government is spending money on programs which aren't more efficient than private use (or are even losing money), then tax evasion actually helps the economy (in totalitarian states, it leads to black markets) and it's the government which is being greedy and stealing people's money.

      There's a tendency for libertarians to pretend only the second state exists, and for big-government proponents to pretend only the first state is possible. The reality is that either state is possible. We have to be constantly vigilant to appraise the effectiveness of government programs, and not afraid to cut the ones which become wasteful. But likewise, neither should we immediately dismiss all government programs as wasteful.

      • by AuMatar (183847) on Sunday April 28, 2013 @04:02PM (#43575783)

        There's also programs that may be inefficient or cost money that society decides are worth paying for anyway. Not everything needs to be about making a profit. Those programs should still be watched to ensure that are as efficient as possible, but they shouldn't necessarily be killed. Social Security is an example of that- there's no financial gains for keeping old people alive and sheltered, but its something society decides is a good idea.

        • by omglolbah (731566)

          That isnt really the argument though as I read it.

          If a government program run by a public entity does X amount of work at the cost of 1 million dollars...

          And a private entity can do the exact same amount of X for 0.9 million dollars.. The argument is to let the private entity handle the work.

          This also goes the other way though and sometimes it is much less costly to have a public entity handle something compared to having it privatized.

          Fire protection services, various welfare programs and the likes.

          • by xelah (176252)
            For an economy, efficiency isn't just about doing a particular thing with fewer resources. You can also be inefficient by doing the wrong things. Think of the badly organized communist state which manufactures - very efficiently - twice as many left shoes as right. Or more plausible government that piles its country's resources in to terrorism prevention, whilst ignoring road safety.
      • by AmiMoJo (196126) *

        Problem is that things like treating sick people instead of letting them die in the street isn't a very efficient use of money. A private company that doesn't give a shit about human suffering could generate more profit with that cash.

        It is also rather hard to determine what is efficient when the pay-back on some things can take decades to arrive. The government often funds basic research that takes 10-20 years before any company becomes interested in and commercializes it, and sometimes it fails completely

        • Yore post sounds plausible, but declares that the world's we live in cannot exist. For example:

          That's the nature of research and if the government didn't do it then no for-profit company that can't see past next quarter's profits is going to.

          Sounds good, but in fact companies actually do most research. 3M and Dupont are largely research labs, for example. Surely you're familiar with the contributions of Xerox PARC (Palo Alto RESEARCH Center). Everybody likes to beat up on drug companies, but they spend BILLIONS on research. The best research in the world was 20th century US, when Edidon's research labs were creating awesome new stuff weekly, withou

          • In my experience, the difference between government R&D versus private R&D is that companies do research that might actually achieve something - a more effective lightbulb or a cure for a disease. Government researches the breeding habits of the Southern Maryland pond worm for "just because", for no apparent reason.

            That "just because" provides the foundation on which to develop actual products. The light bulb started out as an interesting experiment long before Edison developed one that was commercially viable.
            People put research and development in the same category, when they are not. Research is the "just because," development is the "actually making something." If you look at Bell Labs, which has been one of the most fruitful corporate R&D endeavors, only 10% of its workforce was focused on research. Xerox

          • You don't know enough about research and industry.

            I will sum it up.

            Public research digs up the most fundamental knowledge that in itself is only knowledge that can be applied.

            Private research takes the public findings and refines the knowledge in a very focused, product-oriented way.

            Both are required for our current successes.

      • by xelah (176252)

        - If the tax money collected by the government is spent on a program which yields a higher return (by increasing the nation's productivity) than if the money had remained in private hands, then tax evasion is stealing from other taxpayers.

        It isn't quite as simple as that. Suppose you're a better carpenter than me and I'm a better gardner than you. And suppose there's some carpentry I want I could do myself in 10 hours, and you could do in 8. And suppose there's some gardening you want you could do in 10 hours and I could do in 8. The logical thing - the efficient thing - is to swap tasks and do each others. We both get what we wanted with less effort. Now suppose there's a 25% or more tax - for every 8 hours work you do, you have to do anoth

      • by Livius (318358)

        And it's a simple calculation because governments only spend money on one thing.

    • by hairyfeet (841228)

      Well this probably shouldn't be taxed until its turned into something tangible or should be treated like capital gains in that you don't pay until you cash out. I mean we don't tax the virtual armor in MMOs, even though people actually pay real money for that shit, so I don't see why bitcoins should be treated any differently. At the end of the day its really just this virtual thing that really only has value because some people believe in it,, again we have seen people pay crazy prices for virtual crap bec

    • Re: (Score:2, Funny)

      Libertarian types trying to sponge off the taxes of hard working tax payers via tax evasion

      Statist socialist types trying to sponge off hard working capitalists via government strong arming with prison and fines.

      There, FTFY.

    • by khallow (566160)

      All seems reasonable to me.

      They're just repeating rules that are already in place. Reasonable and what should be self-evident.

      Libertarian types trying to sponge off the taxes of hard working tax payers via tax evasion need to stop being so greedy and stealing other peoples money.

      That type of "libertarian" shows up throughout human society and has all sorts of professed ideologies.

  • And how exactly do they plan to accomplish this? Technical explanation required.

    • Perhaps they'll make the exchanges report...exchanges.

      Then exchanges will move offshore, and the governments will deem them illegal - kind of like gambling. So you'll have your BTC, but you'll have a hard time getting that turned into $CAD. 'Hard' being relative in the internet age, of course - it's not that hard to do online gambling in the U.S., and the Dutch tend to have zero problems accessing TPB despite ever-updating IP blocks.

      To be honest, though, it isn't that much different from U.S. states in wh

    • Just like cash, they can't tell if you give your friend a few coins in return for something. But any company in the business of providing goods and services had better have their books in order. (Even drug dealers pay their taxes if they're smart -- too much attention on them otherwise.) They are going to tax volume sellers and cover the majority of transactions that way. Your piddling little trade doesn't factor into the grand scheme of things.
      • (Even drug dealers pay their taxes if they're smart -- too much attention on them otherwise.)

        I would be interested in knowing best practices in this case.

        Do you pay an import duty on your Colombian cocaine? Sales tax in the purchaser's city? Do you get addresses of your customers? VAT in Europe?

        Fascinating idea.

    • by raymorris (2726007) on Sunday April 28, 2013 @03:55PM (#43575725)
      Tax laws are enforced through audits. The government notices you have a site selling T-shirts, for example . Based on hueristics plus a random chance, they may decide to audit you. At the audit, tney examine your books, comparing what you spend versus the income you report. Maybe they notice you have a car, a 2011 Camaro. They know how much a 2011 Camaro costs, they probably see the payments on your bank statement. There had better be income reported to cover that expense. Once all of the major expenses are covered, and everything that's shown on your bank statements, and any major assets are accounted for, they know roughly what you're probably spending in cash, on small things. (People with $150,000 houses and $35,000 cars spend about $x,000 on entertainment.) It needs to all add up with the income you report.

      Secondarily, someone can rat you out. Maybe ypu have a partner or employee helping you sell "Fuck Taxes" T-shirts. If things go south, the former partner or employee could alert them to the fact that you sold $xx,xxx worth of T-shirts and didn't report the income. (Tax fraud.) Maybe the employee rats you out when SHE gets audited, or maybe she's unable to hide the income from the bysiness when she's audited.

      It's easier to just pay the taxes you owe.
    • Same way they tax companies that only engage in cash transactions.

      It's not hard. Yes, there are opportunities for fraud, but when one company says it paid 1,000,000 bitcoins for a PC, and the selling company says it sold the PC to the first company for 10 bitcoins, then one or the other company has submitted a fraudulent tax return, and the truth will come out once both are investigated.

  • ummm... duh (Score:4, Informative)

    by larry bagina (561269) on Sunday April 28, 2013 @03:15PM (#43575495) Journal
    Can't speak for Canada's tax laws but that's entirely consistent with US tax law. Capitol gains are taxable. Bartering is taxable. The only news is that by specifically naming bitcoin they're further legitimizing it.
  • Good for bitcoin (Score:5, Insightful)

    by vasanth (908280) on Sunday April 28, 2013 @03:17PM (#43575497)
    good in the sense it is gaining legitimacy..
  • The only newsworthy in this, is the fact that the authorities are looking into BitCoin transactions, thereby raising BitCoins legitimacy in the playingfield.

    Pretty much every country on the planet taxes both capitol gains and bartering. In fact, one may wonder what took the authorities so long ...

    - Jesper

    • by green1 (322787)

      Nothing "took them so long" because nothing has changed. This is simply a press release explaining that everyone who thought things were different because it's bitcoins were wrong, and that the existing rules still apply.

      And honestly, nobody should be even the slightest bit surprised. If you knew anything about taxes (which everyone who pays taxes should!) you'd know that barter transactions are taxable, and commodities transactions are taxable. Bitcoins obviously fall in to one or both of those categories,

  • by CmpEng (1123811) on Sunday April 28, 2013 @03:50PM (#43575679)
    I made about $6500 in 2011 from bitcoins and my accountant advised me to treat it as I would any additional income. I suspect this is making things official in the sense that the CRA will start looking into past years to see if people haven't properly claimed it. In addition to claiming the $6500 as income I was able to write off a portion of my house utilities, mortgage, etc... in accordance with local bylaws.
  • by nuckfuts (690967) on Sunday April 28, 2013 @04:26PM (#43575955)
    The CRA is not claiming a tax on "all transactions". They're claiming a tax on capital gains and income. If you make a transaction that results in a chunk of cash coming into your possession, or the equivalent in material goods, the value of that gain is considered taxable income. It has absolutely nothing to do with the medium of exchange. The CRA is not taxing BitCoin per se; they are taxing profits. They don't care whether you're using BitCoin or not. They're merely pointing out that using BitCoin as a medium of exchange does not confer some kind of exemption from taxes due.
  • by CanEHdian (1098955) on Sunday April 28, 2013 @04:49PM (#43576099)
    This should mean that you can start a business that is into bitcoin mining, and have your cost of doing business (Top-of-the line computers, GPU cards, etc.) deductable as a business expense.
    • by hotseat (102621)

      Sure. And those costs would then be offsettable against your profits for the purposes of paying tax on the bitcoins mined. You have been declaring them as taxable income, right?

  • No special laws needed for this. If you earn $1 you pay income tax on it in most countries I'm sure. The govt doesn't care what currency you earn in. And capital gains are still capital gains, and thus taxable income, again, no matter the currency.

    I've not heard anyone talking up Bitcoin as a means to evade legitimate taxes.

  • by xiando (770382) on Sunday April 28, 2013 @07:18PM (#43576899) Homepage Journal
    I've traded a few bitcoins so I looked up the local rules and the rules for currency trading is basically the same as stock trading. Nothing special, you take gains minus losses and pay capital gains tax on that. duh!? I don't see how Canada saying that normal rules for currency sales & sales of goods and services in other currencies apply to Bitcoin is "breaking news". Here's the rules which apply to Swedish people: http://www.skatteverket.se/privat/skatter/vardepapperforsakringar/utlandskvaluta/valutahandel.4.70ac421612e2a997f85800029336.html [skatteverket.se]
  • To all those naively posting that this is evidence of "legitimization" of bitcoin, it should be considered that most governments also tax illegal transactions (when they can't prove it illegal by the standards of court, though they know such activity is going on, so they just prove income): it's not what is being sold or traded, but what they can define as incomes and then demand, on that basis, a cut. Never mind that they're insolvent, control that money supply, print it with interest and add it to "public

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