A statement from the Canadian tax agency reveals it is keeping a close eye on the virtual currency market
The Canada Revenue Agency (CRA) has issued a statement in which it made very clear that it thinks Bitcoin (BTC) transactions are taxable, and it expects responsible citizens to declare such transactions.
It has compared exchanging Bitcoin for goods to barter trade, and Bitcoin trading to securities trading.
The virtual currency has made the headlines and gone from boom to bust in recent weeks: on April 10, it was trading at an all-time high of $266, but dropped to $105 following a DDoS attack on Mt Gox, the world’s biggest Bitcoin currency exchange. A week later, another DDoS attack, this time against the Bitcoin Blockchain, threatened the fragile ecosystem further.
Despite these setbacks, the virtual currency has somewhat recovered and is now valued at around $138 per Bitcoin.
Nothing is certain but death and taxes
Bitcoin (BTC) is a digital crypto currency based on an open-source, peer-to-peer Internet protocol. Introduced in 2009 by an anonymous developer known under the alias ‘Satoshi Nakamoto’, until recently it was mostly used by individuals interested in keeping their transactions secret.
Bitcoins cannot be traced, and their ownership cannot be established. This has led to their popularity among certain Internet subcultures, anarchists and even real-world criminals. WordPress started accepting Bitcoin last year to get around the ban on transactions from certain countries enforced by Paypal, Mastercard and Visa. Kim Dotcom’s Mega, a website that encrypts all user data to avoid state monitoring, also welcomes the virtual currency.
According to Canadian Broadcasting Corporation (CBC), the Canadian market has embraced Bitcoin, and there are even some houses in Saskatoon with their price listed in BTC.
This has raised a serous question for the CRA: do you tax Bitcoin transactions, and if you do, then how? The agency firmly believes that both “barter” transactions and trading bitcoins for speculative purposes should be taxed.
It told CBC that the first should be subject to income tax, while the second should be treated as transactions in securities, with traders declaring income or capital gains or losses.
At the moment, it is unclear how CRA intends to enforce tax collection, taking into the account the anonymous nature of this new type of money.
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