The amendment came into effect retroactively on May 18, 2019. (f.1), which includes cryptocurrencies such as Bitcoin.3 Consequently, certain transactions involving cryptocurrencies are now exempt from GST/HST. 123(1) “financial instrument” was amended to include a “virtual payment instrument”, para. This means that taxpayers who provide financial services do not need to collect and remit GST/HST on those services. Financial services are generally considered an “exempt supply”. Lending or trading of cryptocurrency may fall within the broad category of “financial services” under subs. Lending cryptocurrency and related “financial services” See also Blue J’s blog on the income tax implications of crypto transactions, linked below. For more details on what the CRA determines to be reasonable methods of determining the proper valuation of crypto, see Guide for cryptocurrency users and tax professionals. The CRA has provided some guidance on the proper valuation of crypto in the income tax context but not for excise tax purposes. Determining the FMV of crypto is challenging. First, the taxpayer must be a GST or HST registrant, second the goods or services sold must be a “taxable supply” and third, the FMV of the cryptocurrency at the time of the supply must be determined. 2 There are 3 issues which flow from this rule. If a taxpayer receives cryptocurrency as payment for selling a taxable supply of goods or services, the taxpayer is still required to remit the GST/HST based on the fair market value (FMV) of the cryptocurrency at the time of the supply.1 For example, Starbucks would still be obligated to collect and remit GST/HST even if it begins to accept Bitcoin as payment. Paying for goods and services with cryptocurrency This depends on whether the transaction involving crypto constitutes a supply of financial services or if it is simply used as payment for a good or service. So, if the four tests are passed a taxable supply exists.Transactions involving cryptocurrency may be exempt from GST/HST.Are the taxable supplies that are being made of a kind which, subject to differences of detail, are commonly made by those who seek to profit from them?.Is the activity predominately concerned with the making of taxable supplies for a consideration?.Is the activity conducted in a regular manner and on sound and recognised business principles?.Does the activity have a certain measure of substance in terms of the quarterly or annual value of taxable supplies made (bearing in mind that exempt supplies can also be business)?.Is the activity an occupation or function, which is actively pursued with reasonable or recognisable continuity?.Is the activity a serious undertaking earnestly pursued?.The tests were set out as long ago as 1981 and may be summarised as follows: I have only recently ended a dispute over this definition for a (as it turns out) very happy client.
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