While the U.S. is still struggling to decide how to regulate cryptocurrency, Canada, is attempting to decide how to enact new crypto taxes. However, the country’s CPAs are concerned that these tax rules might scare away future entrepreneurs.

Born2Invest mobile application brings you the latest crypto, and business news from trusted sources to a single screen so you can stay on top of the market. The application is aggregating the most important and breaking news from relevant websites, the list is always revised and updated with new resources.

The Canadian crypto industry

The crypto and blockchain industries have seen some success in Canada particularly in 2017 and 2018, when the adoption rate surged by 25%. Meanwhile, authorities have been trying to find a way to regulate and tax the industry. The Canadian Tax Agency (CRA) introduced taxes six years ago and recently conducted audits to identify potential tax evaders.

As the crypto industry develops, so the do Canadian tax rules, the government is starting to address the tax problem. Recently, Finance Canada began classifying some cryptocurrencies as financial instruments, which is a problem by itself, as the CRA sees crypto as an investment commodity when in reality different projects have different purposes.

Put simply, the CRA does not consider crypto to be money, which means that buying goods and services using cryptocurrency is considered a barter transaction. This can lead to double taxation, which could quickly become a big problem for crypto users in Canada and discourage widespread adoption of cryptocurrency as money.

A new category for crypto: VPI

The issue is the status of crypto in determining user tax on goods and services and harmonized sales tax (GST/HST). This is why Treasury Canada believes that crypto should be classified as a new category of financial instruments. They proposed to create this category and call it virtual payment instruments (VPIs), which would exempt crypto from GST/HST.

However, this solution has its own problems, such as the need to have a license to operate a crypto enterprise and in some cases to be registered as a financial institution. This is of course very troublesome not only for business but for ordinary users as well. Meanwhile, PwC Canada has stated that financial institutions for GST/HST purposes must follow the rules established for all financial institutions currently in existence.

As for the VPI, this designation would only apply to some select cryptocurrencies, with the list of specific coins still being formulated. However, the VPI definition would ignore cryptos created for a particular goal, including stable coins, utility tokens, as well as closed blockchains, such as the Libra project.

The new draft also has a lot of holes to fill, as it doesn’t even mention crypto mining, which is a major part of the crypto world. While Canada is trying to fight against cryptocurrencies, the country’s regulators are mainly concerned about taxing users of cryptographic assets at all costs.

__

(Featured image by David McBee via Pexels)

DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.

This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.

First published in NewsRu.ca, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Born2Invest assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Born2Invest is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us.