The Canadian taxman is reportedly collecting information from investors. According to Forbes, the Canada Revenue Authority (CRA) is surveying investors about their cryptocurrency holdings.
Taxpayers are receiving questionnaires from the institution. The section focused on cryptocurrencies has 54 questions. It is 13 pages long. From the survey, it is clear that the CRA is aiming at taxing crypto profits.
Source of Funds, Covert Activity
The questions also sought to find out the source of funds that people were investing in crypto. If someone has a digital assets portfolio, they were required to disclose how much it is worth.
In addition, the CRA asked whether the investors used mixers and tumblers. These are tools which can obfuscate data. They prevent tracking of funds from one account to another. The tools are ideal for illegal practices like money laundering.
Thirdly, the CRA’s form sought data on whether people use services like Shapeshift and Changelly. These are easily-accessible trading apps. They do not need people to reveal their real identities.
Tax on Investment Gains
The CRA has been taxing crypt gains since 2013. It is keeping a close eye on the trading activities on the registered trading platforms.
The current push comes as the tax season draws close. Taxpayers must file their income by April 30th, if they have salaried positions. Self-employed taxpayers have to declare theirs by June 15th.
The current data collection push aims to get it before the taxing season. Investors who earned money from crypto need to fulfill their tax obligations before the deadlines.
New Tools for Investors
Ernst & Young is working on a tax calculation tool. The company aims to provide access to the tool for both retail and institutional investors. In the USA, the Intuit Tax group has developed a similar solution. However, American investors can only access this tool if they are using Coinbase.
CRA Investor Education
The CRA has published information that will educate people about their taxes. It has announced that having assets in digital currencies does not exempt an individual from paying their taxes.
It is very similar to the stock portfolio. According to Deloitte’s partner in charge of blockchain practice in Canada, Dennis Domazet:
As a starting point, everybody should approach any form of profit-making investments as taxable.
Another blockchain tax lead at Deloitte, Alex Hefti, added:
A lot of Canadians this year have been trading different types of cryptocurrencies — so for example bitcoin to ether, ether to litecoin, and so on — each of those transactions is a disposition of property and is taxable.
Do you think Canadian taxpayers should keep a record of trades on exchanges? Let us know in the comments section below!