The virtual world of computers really is a world of its own, and what would a world be without money? Not to worry though, because this realm has its own currency called bitcoins. If you are already familiar with them and have been doing online transactions with them, then be prepared to reveal this to your Toronto tax accountant, because the CRA already has an interest in them.
Many of us have used online transaction sites like ewallets where we deposit money into these online financial institutions then pay for our purchases through their portals. Bitcoins are a little more complex than that, and for that reason they are often used for illegal activities.
First though be aware that bitcoins have no formal authority governing them. For this reason you really have no safety protection for these coins if someone happens to hack into your bitcoin reserve which is housed on a third party website. It is estimated that there are about 21 million bitcoins in existence but only 11 million have been discovered to date.
Being as this virtual money is not all that readily available online and is so complex there are very few sites that accept bitcoins as payment.
So you may be thinking that because these are virtual money and not recognized currency that the CRA has no claim on this. Think again because this government agency has it well covered under their bartering rules. So if you buy or sell items online mostly in the business sense then you are subject to bartering.
There is one more area of interest for the CRA and bitcoins and that’s investment gains. So if you are selling bitcoins for profit its like selling a commodity and therefor is subject to gains or losses which could in turn be income or capital.
As mentioned, the bitcoin system is really quite complex and difficult to trace. As it gains in popularity however you can bet that the CRA is going to strengthen their interest in this virtual money and how it eventually can convert to real currency. If you are involved with this currency now you would be smart to stay on the right side of the law and determine whether your transactions are falling under the umbrella of bartering or investment.
If you are in need of a quality Toronto tax accountant, be sure to give us a call here as we would be pleased to be of service.
