What Happens If You Don't Pay Taxes on Crypto in Canada?
Wondering what happens if you don't pay taxes on crypto in Canada? Your hard-earned crypto gains could be washed away with just one fine from the Canada Revenue Agency. Learn about tax evasion, including fines and penalties, as well as how to make a voluntary declaration in our guide.
Crypto gains are taxable. Not paying tax on them is tax evasion.
Tax evasion is a criminal offence in Canada, with fines of up to 200% of the tax due and a sentence of up to 5 years.
The CRA can, and does, track crypto transactions to ensure tax compliance.
Stay compliant with a crypto tax calculator, or make a voluntary declaration if you previously failed to declare.
What happens if you don't pay taxes on crypto?
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.
Failing to pay your crypto taxes is tax evasion and will lead to the tax agency requiring you to pay what you owe, alongside additional fines, penalties, and even potential jail time.
What’s the penalty for tax evasion in Canada?
The penalty for 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:
A fine equivalent to 200% of the taxes evaded, and the amount evaded on top.
Up to five years in jail.
For tax fraud, the maximum prison sentence is 14 years.
Travel restrictions.
It’s also worth noting that the CRA has a near 90% conviction rate and has issued over $3 million (CAD) in fines.
Why can’t you just hide your crypto from the CRA?
Don’t be fooled into thinking the taxman 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 agency has also previously requested customer records from exchanges like Coinsquare in order to ensure tax compliance.
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.
What if I’ve previously avoided crypto taxes?
You may have accidentally failed to pay your crypto tax in the past. 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:
You’re late on a tax return.
Underreported or didn’t report crypto income.
Submitted incomplete or incorrect information
Submitted an incorrect expense claim.
For a full list of VDP eligibility criteria and to apply for a VDP, you should visit the CRA’s official VDP site and speak to an experienced crypto tax accountant in Canada for specific advice.
Stay compliant with a crypto tax calculator
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:
Simple and user-friendly UI
900+ integrations
CRA-compliant tax reports
