cryptonews.com
The Canada Revenue Agency (CRA) is cracking down on crypto, going after C$54m ($39.5m) in suspected unpaid taxes. It is also launching investigations into hundreds of crypto investors.
The National Post reported Monday that Sahil Behal, a director general at the CRA’s compliance branch, revealed the agency is currently conducting around 400 audits on crypto-related activities. Still, he acknowledged a major need for public education regarding crypto tax obligations.
Meanwhile, veteran tax lawyer, David Rotfleisch, criticized the CRA’s efforts as a “drop in the bucket.” He argued the agency needs to significantly increase education on crypto tax obligations for owners and traders.
He also highlighted the issue by mentioning his own experience dealing with “multiple clients with multimillion dollar (crypto) issues,” emphasizing that he’s just one lawyer and likely sees only a fraction of the total cases.
Canada Authority Under Fire for Lax Approach to Tax Evasion
The CRA has previously faced criticism for how it handled tax cheats in the last couple of years. While the agency secures convictions in smaller cases, critics argue it falls short in tackling larger tax evasion instances and aggressive avoidance schemes.
In June 2021, it clarified cryptocurrency is generally considered a commodity for tax purposes. This means any income earned through crypto transactions is taxed as either business income or a capital gain, depending on specific circumstances. Likewise, any losses incurred are treated as business losses or capital losses.
Not all cryptocurrency buying and selling qualifies as business activity for tax purposes. Taxpayers need to determine whether their crypto activities generate income or capital gains. This significantly impacts how they report it on their tax return.
The CRA also offers online resources explaining how cryptocurrency transactions are taxed.
Meanwhile, governments worldwide are stepping up efforts to catch tax evaders. This includes increased information sharing between countries to track individuals who move money internationally or use new technologies to dodge taxes.
Canada to Crack Down on Crypto with Mandatory Reporting
Canada is implementing the Crypto-Asset Reporting Framework (CARF) starting in 2026. This framework requires local crypto-asset service providers or doing business there to submit annual reports to the CRA.
The reported information will include the value of transactions involving cryptoassets and fiat currencies. It will also include exchanges between different cryptoassets and cryptoasset transfers. Additionally, client information such as full names, residential addresses, dates of birth, and taxpayer identification numbers will also be reported.