How the CRA Treats Cryptocurrency Transactions in Canada

April 08, 2025
How the CRA Treats Cryptocurrency Transactions in Canada

Introduction

The Canada Revenue Agency (CRA) classifies cryptocurrency as a commodity rather than legal currency, meaning crypto transactions are subject to tax rules similar to other investment assets. Whether used for trading, business transactions, or mining, cryptocurrency is subject to capital gains tax or business income tax, depending on the nature of the transaction.

 

This guide explains how the CRA taxes cryptocurrency transactions, reporting requirements, and strategies to remain compliant while minimizing tax liability.

 

1. How the CRA Classifies Cryptocurrency Transactions

The CRA considers the intent and frequency of transactions when determining whether crypto earnings are taxed as capital gains or business income:

a) Capital Gains Tax (For Investors & Long-Term Holders)

  • If cryptocurrency is bought and held as an investment, profits from its sale are subject to capital gains tax.
  • Only 50% of the capital gain is taxable, making this a more tax-efficient option.
  • Applicable to:
    • Buying and holding crypto for long-term appreciation.
    • Occasional sales of cryptocurrency.
    • Earning crypto through staking (depends on classification).

b) Business Income Tax (For Frequent Traders & Businesses)

  • If the CRA determines that cryptocurrency transactions are business-related, 100% of the profit is taxable as business income.
  • Business income rules apply if:
    • There is high trading frequency (day trading or short-term speculation).
    • Crypto is used in a business or commercial activity.
    • The taxpayer has professional knowledge of the market and trades actively.

 

2. Types of Taxable Cryptocurrency Transactions

The following crypto activities are taxable events in Canada:

  • Selling cryptocurrency for fiat currency (CAD, USD, etc.).
  • Trading one cryptocurrency for another (e.g., Bitcoin to Ethereum).
  • Using cryptocurrency to pay for goods or services.
  • Receiving crypto as income from mining, staking, or business operations.

Each of these activities requires taxpayers to calculate and report their taxable income or capital gains in Canadian dollars using the fair market value at the time of the transaction.

 

3. Cryptocurrency Mining and Taxation

  • If mining is considered a hobby, income may be taxed as capital gains when sold.
  • If mining is a business, income is taxed as business earnings, and mining-related expenses (hardware, electricity, etc.) may be deducted.
  • Businesses engaged in mining must charge GST/HST on mining services if revenue exceeds $30,000 annually.

 

4. Cryptocurrency Reporting Requirements

a) Income Tax Reporting (Personal and Business Filings)

  • Capital gains and losses are reported on Schedule 3 of the T1 tax return.
  • Business income from crypto is reported on Form T2125 – Statement of Business Activities.

b) Foreign Crypto Holdings (T1135 Filing)

  • Canadians holding foreign crypto accounts or wallets exceeding $100,000 CAD in total cost must file Form T1135 (Foreign Income Verification Statement).

c) GST/HST Considerations for Crypto Businesses

  • Businesses accepting crypto payments may need to charge and remit GST/HST based on the fair market value of crypto at the time of sale.

 

5. Strategies to Minimize Crypto Taxes in Canada

  • Hold crypto for longer periods to qualify for capital gains tax treatment instead of business income tax.
  • Keep detailed records of transactions, including dates, values, and exchange rates.
  • Claim eligible business deductions if operating as a mining or trading business.
  • Use tax-loss harvesting to offset capital gains with crypto losses.

 

Conclusion

The CRA treats cryptocurrency as taxable property, meaning all transactions must be accurately reported under either capital gains or business income tax rules. Proper tax planning can help minimize liabilities and ensure compliance with Canadian tax laws. 

 

Tax Partners can assist individuals and businesses in structuring their crypto transactions efficiently, filing tax reports correctly, and optimizing tax-saving strategies.

 

 

This article is written for educational purposes.

 

Should you have any inquiries, please do not hesitate to contact us at (905) 836-8755, via email at [email protected], or by visiting our website at www.taxpartners.ca.

 

Tax Partners has been operational since 1981 and is recognized as one of the leading tax and accounting firms in North America. Contact us today for a FREE initial consultation appointment.

 

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