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Cryptocurrency & NFT Taxes in Canada: CRA Rules, Reporting, and How to Stay Compliant

Cryptocurrency and NFTs are no longer “off the radar” when it comes to Canadian taxes. The Canada Revenue Agency (CRA) treats cryptocurrency transactions the same way it treats transactions in Canadian dollars, they are taxable and reportable.

Whether you trade Bitcoin, mine crypto, accept crypto as payment, or sell NFTs, your activity can trigger income tax, capital gains tax, GST/HST obligations, and even CRA audits if reported incorrectly, or not at all.
This guide explains:

  • How cryptocurrency and NFTs are taxed in Canada
  • When crypto is treated as capital gains vs. business income
  • How GST/HST applies to crypto transactions
  • CRA audit activity and international enforcement
  • Record-keeping requirements and penalties
  • Legal ways to reduce crypto tax exposure

Key Takeaways

  • Cryptocurrency and NFTs are taxable in Canada
  • Income is treated as business income or capital gains
  • Crypto transactions can trigger GST/HST
  • CRA actively audits crypto users and cooperates internationally
  • Poor record-keeping is one of the biggest audit risks
  • Unreported crypto income can result in penalties or prosecution

How the CRA Classifies Cryptocurrency and NFTs

The CRA considers cryptocurrency, tokens, and NFTs to be commodities, not currency.
This means:

  • Crypto is treated like stocks, gold, or real estate
  • Each cryptocurrency is a separate asset
  • Bitcoin, Ethereum, Solana, NFTs, etc., are tracked individually
  • Gains and losses must be calculated in Canadian dollars

When Cryptocurrency Is Taxable (Disposition Rules), You do not pay tax simply for holding crypto. Tax applies when a disposition occurs.

Taxable crypto events include:

  • Selling crypto for cash
  • Trading one crypto for another
  • Using crypto to buy goods or services
  • Gifting crypto
  • Converting crypto to fiat
  • Selling or trading NFTs

Every one of these events requires calculating fair market value (FMV) in CAD at the time of the transaction.

Capital Gains vs. Business Income (Critical Distinction)

Capital Gains (50% Taxable)
Crypto activity is usually treated as a capital gain if:

  • Trading is occasional or investment-oriented
  • You are not operating like a business
  • There is no high transaction frequency
  • No reliance on crypto for primary income

Only 50% of the gain is taxable.
Reported on: Schedule 3

Business Income (100% Taxable)

Crypto is treated as business income if:

  • You trade frequently
  • You mine crypto
  • You accept crypto as payment
  • You promote or operate like a trading business
  • You earn income from staking, nodes, or mining

100% of income is taxable.

Reported on: T2125 – Statement of Business Activities (if you own it in your personal name or if the transaction is in your personal name)

Example: Capital Gain on Cryptocurrency

Scenario:
David sells personal items and receives $3,000 worth of Bitcoin.
One year later, he sells that Bitcoin for $4,000 CAD.

Capital gain:
$4,000 − $3,000 = $1,000

Taxable amount:
$1,000 × 50% = $500 taxable

Crypto Mining: Always Business Income

Crypto mining is never capital gains.

The CRA considers mining:

  • Active effort
  • No initial capital investment
  • Ongoing business activity

Mining income rules:

  • 100% of income is taxable
  • Equipment and electricity may be deductible
  • GST/HST may apply in some cases

NFT Tax Rules in Canada

NFTs are taxed similarly to cryptocurrency.

Selling Your Own NFT

  • Treated as business income
  • 100% taxable

Selling an NFT You Purchased

  • Treated as capital gains
  • 50% taxable

NFTs used for payment or exchanged for crypto are taxable events.

GST/HST and Cryptocurrency Transactions

If you or your business accept crypto as payment:

  • GST/HST still applies
  • Tax is calculated based on FMV in CAD
  • You must collect, report, and remit GST/HST

Crypto is not exempt from sales tax.

CRA Crypto Audits & International Enforcement

The CRA Is Actively Auditing Crypto Users
The CRA routinely issues crypto-specific audit questionnaires, often exceeding 50 detailed questions, covering:

  • Wallets and exchanges
  • Transaction frequency
  • Mining activity
  • ICO participation
  • Source of funds
  • Record-keeping practices

International Cooperation (J5)
Canada participates in the Joint Chiefs of Global Tax Enforcement (J5) alongside:

  • United States
  • United Kingdom
  • Australia
  • Netherlands

These agencies share crypto data and audit findings. Crypto is not anonymous.

What Happens If You Don’t Report Crypto Income?

Failure to report crypto income can result in:

  • Reassessments
  • Gross negligence penalties
  • Interest
  • Criminal prosecution for tax evasion

The CRA treats unreported crypto the same as unreported cash income.

Voluntary Disclosure Program (VDP) for Unreported Crypto

If you failed to report crypto income in prior years:

  • You may qualify for the CRA’s Voluntary Disclosures Program
  • Can eliminate penalties and criminal prosecution
  • Must apply before CRA contacts you

Timing and documentation are critical.

Required Crypto Record-Keeping (Non-Negotiable)

You must keep:

  • Transaction dates
  • FMV in CAD
  • Wallet addresses
  • Exchange records
  • Purpose of transaction
  • Mining expenses and hardware
  • Fees and commissions

Records must be retained for at least 6–7 years.

How to Reduce Crypto Taxes (Legally)

  1. Use capital losses to offset gains
  2. Track ACB properly across wallets and exchanges
  3. Donate crypto to registered charities (when applicable)
  4. Claim eligible business expenses
  5. Avoid misclassification (big audit trigger)

Final Thoughts

Cryptocurrency and NFT taxation in Canada is complex, aggressively enforced, and constantly evolving.
The biggest risks come from:

  • Poor record-keeping
  • Misclassifying income
  • Assuming crypto is “anonymous”
  • Ignoring GST/HST

With proper planning and accurate reporting, crypto tax exposure can be managed, but it must be done correctly.

Need Help With Crypto or NFT Taxes?

Diamond CPA, one of the best accounting firms in Scarborough, Toronto, with decades of work experience, can help Canadian investors and businesses:

  • Classify crypto income correctly
  • Prepare CRA-compliant filings
  • Handle audits and reviews
  • Correct past non-compliance

Disclaimer:
This article provides general information only and does not constitute tax or legal advice. Cryptocurrency tax treatment depends on facts and circumstances. Always consult a qualified professional before acting.