Wondering what happens if you don't pay crypto taxes in Canada? Your hard-earned crypto gains could be washed away with just one fine from the Canada Revenue Agency; Koinly is here to make sure you don’t end up on the wrong side of the crypto tax rules.
No one likes paying tax, especially when we’ve smashed our returns target on our Crypto investments, right? But the Canada Revenue Agency (CRA) has made it abundantly clear that tax-avoiding crypto investors will face hefty fines, all your gains and more could be wiped out with one swift audit.
In this guide, we’ll give you all the information you need about the Canadian government's stance on crypto taxes and the pitfalls and penalties of crypto tax evasion and avoidance.
Wondering what happens if you don't pay taxes on crypto in Canada? The short answer is you’ll end up with a hefty fine or worse. Even though the cryptocurrency market is still in its infancy, the CRA has accepted that Bitcoin and many of the alt-coins are here to stay. As a result, the CRA treats tokens and NFTs the same as stocks and, as a result, expects you to pay Capital Gains Tax or Income Tax on your investments.
Failing to pay your crypto taxes will most likely lead to the tax agency requiring you to pay what you owe, along with a nasty slab of interest on top and a filing penalty. Essentially you could end up losing all your gains… and then some.
The way the CRA will tax your crypto depends on how they categorize your crypto holdings.
The CRA’s list of taxable crypto activities is pretty extensive, but there are still some instances that they don’t consider taxable, such as:
We’ve given you a brief summary here on how you can expect the CRA to tax your crypto; if you want to get a more in-depth understanding of this area, check out Koinly’s Crypto Tax Canada guide.
Even though cryptocurrencies such as BTC, ADA, and ETH aren’t controlled by a central authority that can report you to the CRA, don’t be fooled into thinking the tax man doesn’t know what's in your wallet.
In January 2022, the CRA announced that all crypto services are required to report any transactions over $10,000 and increased the pressure on companies to obtain Know-Your-Customer (KYC) data from customers.
The regulations mean that despite the decentralized nature of crypto, you’re going to really struggle to keep your tokens hidden from the tax authorities.
The CRA isn’t messing about, and you need to ask yourself if avoiding tax is worth the risk. Koinly is here to help you stay within the CRA’s parameters. Before getting into how Koinly can help you, let's find out how much you will be taxed.
The penalty for crypto tax evasion in Canada is pretty severe and can even result in a jail term. The CRA’s website lists the following potential penalties for tax evasion:
It’s also worth noting that the CRA has a near 90% conviction rate and has issued over $3 million (CAD) in fines.
As a Canadian taxpayer, you will be hit with both a Federal Income Tax and Provincial Income Tax. You can check both the Federal and Provincial tax rates in our Canada Crypto Tax Guide
It’s possible that you’ve accidentally failed to pay your crypto tax in the passed; don’t panic you can avoid future penalties through the voluntary disclosure program (VDP). The CRA’s VDA offers case-by-case amnesty to people who voluntarily come forward to rectify past failures to file their taxes.
You should consider applying for the VDP if:
For a full list of VDP eligibility criteria and to apply for a VDP, you should visit the CRA’s official VDP site.
Koinly’s crypto tax calculator is built on the premise that crypto investors need an easy-to-use tax calculator that removes the red tape that often overwhelms and even discourages people from paying taxes.
Some of the features Koinly offers include:
If you’re worried that we’re being biased, read our reviews on Trustpilot, where we rank at the top of the list for Crypto Tax providers, and to learn more about how Koinly crypto tax calculator works or to try it for yourself, visit our site.