The CRA’s Stance on Cryptocurrency and NFTs in Canada

April 02, 2025
The CRA’s Stance on Cryptocurrency and NFTs in Canada

Introduction

The Canada Revenue Agency (CRA) treats cryptocurrency and NFTs (Non-Fungible Tokens) as taxable digital assets, meaning they are subject to capital gains tax, business income tax, and potential sales tax obligations. Whether an individual is investing, trading, mining, or creating NFTs, they must properly report their crypto-related transactions to avoid tax penalties.

 

Understanding how the CRA classifies and taxes digital assets is crucial for Canadian investors, traders, and businesses engaged in the cryptocurrency and NFT space.

 

1. How Cryptocurrency Is Taxed in Canada

a) Capital Gains vs. Business Income

  • Capital Gains Tax applies if cryptocurrency is bought and held as an investment before being sold at a profit. Only 50% of the capital gain is taxable at the individual’s marginal tax rate.
  • Business Income Tax applies if the CRA determines that the taxpayer is actively trading crypto as a business. In this case, 100% of the profits are taxable as business income.
  • The CRA considers frequency, intention, and trading activity when determining whether crypto transactions are capital gains or business income

b) Common Taxable Crypto Transactions

  • Selling cryptocurrency for fiat currency (CAD, USD, etc.).
  • Trading one cryptocurrency for another (e.g., exchanging Bitcoin for Ethereum).
  • Using cryptocurrency to purchase goods or services.
  • Earning cryptocurrency through staking, mining, or airdrops.
  • Receiving crypto as payment for goods or services.

Each of these transactions is considered a disposition and may result in a taxable event.

 

2. How NFTs Are Taxed in Canada

a) NFT Investors (Buyers and Sellers)

  • If an NFT is bought and later sold at a profit, the seller must report capital gains, and 50% of the gain is taxable.
  • If NFT trading is frequent and considered a business activity, 100% of the profits are taxed as business income.

b) NFT Creators and Artists

  • If a taxpayer creates and sells NFTs, earnings are considered business income, and 100% of the revenue is taxable.
  • Royalties received from secondary sales are also considered business income.

c) GST/HST on NFT Sales

  • NFT creators selling to Canadian buyers may be required to charge and collect GST/HST if their revenue exceeds $30,000 per year.
  • Buyers may also be required to pay GST/HST on NFT purchases, depending on how the CRA classifies them.

 

3. Reporting Requirements for Crypto and NFTs

a) Keeping Detailed Records

  • The CRA requires taxpayers to maintain detailed records of all crypto and NFT transactions, including:
    • Dates of purchase and sale
    • Transaction amounts and values in CAD
    • Wallet addresses and exchange details
    • Receipts and invoices

b) Foreign Crypto Assets and T1135 Filing

  • Canadians holding crypto or NFTs in foreign exchanges or wallets may be required to file Form T1135 (Foreign Income Verification Statement) if the total cost exceeds $100,000 CAD.

 

4. Future CRA Regulations on Crypto and NFTs

  • The CRA is increasing enforcement efforts and improving tracking of digital asset transactions.
  • More stringent reporting requirements for cryptocurrency exchanges and NFT platforms are expected in the coming years.
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Conclusion

The CRA treats cryptocurrency and NFTs as taxable assets, and failure to report them properly can result in penalties. Whether an individual buys, sells, trades, or creates digital assets, understanding how the CRA taxes these transactions is essential for compliance. 

 

Tax Partners can assist individuals and businesses in structuring their crypto and NFT transactions efficiently, minimizing tax liabilities, and ensuring full compliance with CRA regulations.

 

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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