In 2024, if you're involved in airdrops, forks, receiving gifts, or mining, it's important to keep up with the tax rules laid out by the Canada Revenue Agency (CRA). We will break down how these particular transactions are taxed and what you should be aware of for this year.
How is Airdrops Taxed in Canada
In Canada, when you receive free tokens or coins through airdrops – where they just drop into your account – you won't face immediate taxes. The tricky part comes into play when you start spending, swapping, gifting, or selling these airdropped cryptos. If you're an individual trader and not running a business, the Canada Revenue Agency (CRA) is less likely to view airdrops as income.
Capital Gains Tax on Airdrops:
The CRA typically doesn't treat airdrops as income, especially for individuals who are trading, not operating as a business. However, remember that when you sell the airdropped crypto, Capital Gains Tax comes into play.
Example:
You hold a cryptocurrency wallet, and on a particular day, you receive an airdrop of 200 tokens of a new cryptocurrency, 1INCH. The Fair Market Value (FMV) of 1INCH on that day is $3.
The Canada Revenue Agency (CRA) is unlikely to consider airdrops as income, especially if you're seen as an individual trader rather than operating as a business. Therefore, receiving the 1INCH tokens in the airdrop is generally not subject to Income Tax.
For a period, you decide to hold onto these airdropped 1INCH tokens without any additional transactions.
After two months, you decide to sell all 200 1INCH tokens when the FMV has risen to $4 per token.
Since airdrops are not taxed upon reception, the Capital Gains Tax applies when you later sell, swap, gift, or spend the tokens received.
Sale Proceeds (FMV at Sale): 200 1INCH * $4 = $800
Original Cost Basis: 200 1INCH * $0 (considered zero for airdrop) = $0
To calculate the capital gains, subtract the original cost basis from the sale proceeds.
Hard forks, where a blockchain splits into two, also pose taxation considerations. While the CRA hasn't issued specific guidance on hard forks, the tax treatment is contingent on how you're viewed as a taxpayer.
Capital Gains Tax on Forks
Similar to airdrops, you won't likely pay tax upon receiving coins from a fork as an individual investor. However, when you later sell, swap, spend, or gift these forked coins, Capital Gains Tax applies. The cost basis for these new coins is typically considered zero, leading to potential tax on the total value upon disposition.
Crypto Gifts and Donations Tax
Capital Gains Tax on Crypto Gifts
Gifting crypto is seen as a disposition, and you'll pay Capital Gains Tax on any profit. The recipient uses the FMV of the asset on the day they received it as their cost basis for future transactions.
Example:
1. Original Acquisition:
You purchased 10 Moonriver (MOVR) tokens in December 2020 at a Fair Market Value (FMV) of $100 per token. Your total acquisition cost is $1,000 (10 tokens * $100).
2. Gifting Decision:
In December 2021, the FMV of Moonriver tokens has increased, and each token is now valued at $500. At this point, you decide to gift all 10 MOVR tokens to your friend.
3. Capital Gains Tax Calculation:
Since gifting crypto is treated as a disposition, Capital Gains Tax applies to any profit made from the increase in value between the time of acquisition and the time of gifting.
Sale Proceeds (FMV at Gifting): 10 MOVR * $500 = $5,000
Original Cost Basis: 10 MOVR * $100 = $1,000
4. Capital Gain Calculation:
To calculate the capital gain, subtract the original cost basis from the sale proceeds.
Donating crypto to a registered charity is considered a disposition with tax consequences. Capital Gains Tax applies if your crypto has increased in value from acquisition to the time of donation. The deemed fair market value rule is followed, and tax receipts from charities may be based on the obtained value.
Example:
1. Initial Acquisition:
In December 2020, you bought 1 Ethereum (ETH) at a Fair Market Value (FMV) of $600.
2. Decision to Donate:
In December 2021, you decide to contribute this 1 ETH to a registered charity. At this time, the FMV of Ethereum has increased, and it's now valued at $4,000.
3. Capital Gains Tax Calculation:
Since donating crypto is viewed as a disposition, Capital Gains Tax applies to any profit made from the increase in value between the time of acquisition and the time of donation.
Sale Proceeds (FMV at Donation): 1 ETH * $4,000 = $4,000
Original Cost Basis: 1 ETH * $600 = $600
4. Capital Gain Calculation:
To calculate the capital gain, subtract the original cost basis from the sale proceeds.
In Canada, only 50% of capital gains are taxable. Therefore, you'll only be taxed on half of the capital gain.
Taxable Capital Gain: $3,400 / 2 = $1,700
Crypto Mining Tax in Canada
For crypto miners, the scale and intent of your mining activities determine the tax treatment, ranging from Capital Gains Tax to Income Tax.
Hobby Mining
If the CRA views your mining activities as a hobby, you won't pay Income Tax when receiving mined coins. However, when you later dispose of these coins, Capital Gains Tax applies, considering the cost basis of mined coins as zero.
Business Mining
For those treating mining as a business, the cryptocurrency is considered inventory. You'll pay Income Tax based on the chosen valuation method for the inventory. It's crucial to factor in costs associated with mining activities, such as electricity and equipment, on a per-coin basis.
Kryptos - Crypto Taxes Made Effortless
When it comes to airdrops and forks, clarity is key. Kryptos takes the guesswork out of the equation, ensuring your tax calculations align with the CRA's guidelines.
1. Quick Setup with Kryptos
Sign up for a FREE Kryptos account in just a minute.
Choose Canada as your base country and Canadian Dollars as your currency.
Select the adjusted cost basis method, supported by Kryptos and approved by the CRA.
2. Seamless Integration
Connect Kryptos to your wallets, exchanges, or blockchains effortlessly.
With compatibility across 3000+ DeFi protocols, you can trust Kryptos to cover your specific needs.
3. Automated Number Crunching
Let Kryptos do the heavy lifting. While you enjoy a coffee, Kryptos calculates your cost basis for every crypto asset, including popular ones like ETH, ADA, Bitcoin, and more.
Watch as Kryptos breaks down each capital gain or loss from your dispositions, along with comprehensive reports on crypto income and expenses.
4. Instant Tax Reports
Ta-da! Your data is gathered, and your full tax report is generated seamlessly.
Head to the tax reports page in Kryptos to explore your tax summary, covering net capital gains, other gains, income, costs, expenses, gifts, donations, or any lost crypto.
FAQs
1. How are Airdrops Taxed in Canada?
Airdrops are not taxed upon receipt in Canada. However, when you sell, swap, gift, or sell the airdropped crypto, Capital Gains Tax applies.
2. What is the Capital Gains Tax on Airdrops in Canada?
Capital Gains Tax is applied when you sell airdropped tokens. Only 50% of the capital gains are taxable. Calculate the tax owed based on the taxable capital gain and the applicable tax rate.
3. How are Hard Forks Taxed in Canada?
Hard forks are not taxed upon receipt. However, when you sell, swap, spend, or gift the forked coins, Capital Gains Tax applies.
4. What is the Taxation Process for Crypto Gifts in Canada?
Gifting crypto is treated as a disposition, subjecting you to Capital Gains Tax on any profit. Calculate the tax liability based on the taxable capital gain, considering only 50% of capital gains are taxable.
5. How is Crypto Mining Taxed in Canada?
For hobby mining, there's no Income Tax upon receiving mined coins. When you sell them, Capital Gains Tax applies with a zero-cost basis. For business mining, Income Tax is levied based on the chosen valuation method for the inventory, considering associated costs.
All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!
Country
Issue
Kryptos Use Case
India
Cryptocurrency transactions are taxed as capital gains, with evolving legislation creating uncertainty.
Kryptos.io streamlines the process by automatically tracking transactions and computing capital gains, adjusting to new regulations for precise reporting.
Brazil
Cryptocurrencies are subject to capital gains tax and must be reported, posing challenges with complex requirements.
Kryptos.io simplifies compliance by offering real-time transaction tracking and detailed tax calculations, making it easier to meet Brazil’s tax obligations.
Nigeria
Regulatory framework for cryptocurrencies is evolving, with uncertainty around taxation and restrictions from the Central Bank.
Kryptos.io provides an adaptable solution by maintaining detailed records and generating flexible reports, helping users stay compliant despite regulatory changes.
USA
Cryptocurrency transactions are subject to capital gains tax, with detailed IRS reporting requirements.
Kryptos.io enhances compliance by automating the tracking of transactions and generating comprehensive tax reports, facilitating adherence to IRS requirements.
UK
Cryptocurrencies are taxed under both capital gains tax and income tax, requiring careful tracking and reporting.
Kryptos.io aids UK users by monitoring both capital gains and income from crypto transactions, ensuring accurate and straightforward tax reporting.
Australia
Cryptocurrencies are subject to capital gains tax, and users must report their gains and losses to the ATO.
Kryptos.io assists Australian users by providing seamless transaction tracking and precise capital gains calculations, ensuring efficient compliance with ATO reporting requirements.
Germany
Cryptocurrencies are taxed as private assets with gains subject to tax if held for less than a year.
Kryptos.io supports German users by tracking holding periods and computing taxes on cryptocurrency transactions, ensuring adherence to German tax regulations.
Japan
Cryptocurrency gains are treated as miscellaneous income and are subject to high tax rates.
Kryptos.io helps Japanese users by offering a detailed tracking system and calculating taxes on miscellaneous income, efficiently managing high tax obligations.
Scenario
Description
Kryptos Features that can be of aid
Multiple Exchanges and Wallets
Consolidating records from various exchanges and wallets to maintain a comprehensive overview of crypto activities.
Seamless integration with numerous exchanges and wallets, automatic import, and consolidation of records.
International Transactions
Managing records for cross-border transactions, including currency conversions and compliance with international tax laws.
Support for multiple currencies, efficient management of cross-border activities, accurate currency conversion for reporting.
Complex Transactions
Handling trades, swaps, staking, lending, and other sophisticated crypto activities.
Advanced tracking, reporting, and documentation for various transaction types. Kryptos' DeFi and NFT modules offer specialized tools for managing decentralized finance and NFT activities, ensuring precise records and comprehensive oversight.
How we reviewed this article
Written by
Ajith Chandan
Content Creator - Kryptos, A Web2 Marketer transitioned to Web3 with 3 years of expertise in Content (Writing. Marketing. Strategizing) and Social media marketing.
Reviewed by
Deepak Pareek
Head of Tax & Accounting - Kryptos, Crypto Tax and Accounting Expert, having experience in working with Big 4 accounting firms as well as top tier law firms of India.
As Web3 evolves, managing a diverse portfolio has become complex. Kryptos simplifies this with advanced tools for real-time tracking, NFT management, and DeFi analytics. Discover how Kryptos turns challenges into strategic advantages for modern investors.
Struggling with crypto tax in Australia? Kryptos.io simplifies the process, ensuring accurate and compliant filings with the ATO. Track transactions and value assets effortlessly—make tax season stress-free.
Mastering Crypto Taxation: Navigate the Complex World of Digital Assets with Kryptos, the Ultimate Solution for Accurate, Efficient, and Future-Proof Tax Reporting.
See More
Canada Crypto Tax on Airdrops, Forks, Gifts, and Mining 2024
By
Ajith Chandan
On
In 2024, if you're involved in airdrops, forks, receiving gifts, or mining, it's important to keep up with the tax rules laid out by the Canada Revenue Agency (CRA). We will break down how these particular transactions are taxed and what you should be aware of for this year.
How is Airdrops Taxed in Canada
In Canada, when you receive free tokens or coins through airdrops – where they just drop into your account – you won't face immediate taxes. The tricky part comes into play when you start spending, swapping, gifting, or selling these airdropped cryptos. If you're an individual trader and not running a business, the Canada Revenue Agency (CRA) is less likely to view airdrops as income.
Capital Gains Tax on Airdrops:
The CRA typically doesn't treat airdrops as income, especially for individuals who are trading, not operating as a business. However, remember that when you sell the airdropped crypto, Capital Gains Tax comes into play.
Example:
You hold a cryptocurrency wallet, and on a particular day, you receive an airdrop of 200 tokens of a new cryptocurrency, 1INCH. The Fair Market Value (FMV) of 1INCH on that day is $3.
The Canada Revenue Agency (CRA) is unlikely to consider airdrops as income, especially if you're seen as an individual trader rather than operating as a business. Therefore, receiving the 1INCH tokens in the airdrop is generally not subject to Income Tax.
For a period, you decide to hold onto these airdropped 1INCH tokens without any additional transactions.
After two months, you decide to sell all 200 1INCH tokens when the FMV has risen to $4 per token.
Since airdrops are not taxed upon reception, the Capital Gains Tax applies when you later sell, swap, gift, or spend the tokens received.
Sale Proceeds (FMV at Sale): 200 1INCH * $4 = $800
Original Cost Basis: 200 1INCH * $0 (considered zero for airdrop) = $0
To calculate the capital gains, subtract the original cost basis from the sale proceeds.
Hard forks, where a blockchain splits into two, also pose taxation considerations. While the CRA hasn't issued specific guidance on hard forks, the tax treatment is contingent on how you're viewed as a taxpayer.
Capital Gains Tax on Forks
Similar to airdrops, you won't likely pay tax upon receiving coins from a fork as an individual investor. However, when you later sell, swap, spend, or gift these forked coins, Capital Gains Tax applies. The cost basis for these new coins is typically considered zero, leading to potential tax on the total value upon disposition.
Crypto Gifts and Donations Tax
Capital Gains Tax on Crypto Gifts
Gifting crypto is seen as a disposition, and you'll pay Capital Gains Tax on any profit. The recipient uses the FMV of the asset on the day they received it as their cost basis for future transactions.
Example:
1. Original Acquisition:
You purchased 10 Moonriver (MOVR) tokens in December 2020 at a Fair Market Value (FMV) of $100 per token. Your total acquisition cost is $1,000 (10 tokens * $100).
2. Gifting Decision:
In December 2021, the FMV of Moonriver tokens has increased, and each token is now valued at $500. At this point, you decide to gift all 10 MOVR tokens to your friend.
3. Capital Gains Tax Calculation:
Since gifting crypto is treated as a disposition, Capital Gains Tax applies to any profit made from the increase in value between the time of acquisition and the time of gifting.
Sale Proceeds (FMV at Gifting): 10 MOVR * $500 = $5,000
Original Cost Basis: 10 MOVR * $100 = $1,000
4. Capital Gain Calculation:
To calculate the capital gain, subtract the original cost basis from the sale proceeds.
Donating crypto to a registered charity is considered a disposition with tax consequences. Capital Gains Tax applies if your crypto has increased in value from acquisition to the time of donation. The deemed fair market value rule is followed, and tax receipts from charities may be based on the obtained value.
Example:
1. Initial Acquisition:
In December 2020, you bought 1 Ethereum (ETH) at a Fair Market Value (FMV) of $600.
2. Decision to Donate:
In December 2021, you decide to contribute this 1 ETH to a registered charity. At this time, the FMV of Ethereum has increased, and it's now valued at $4,000.
3. Capital Gains Tax Calculation:
Since donating crypto is viewed as a disposition, Capital Gains Tax applies to any profit made from the increase in value between the time of acquisition and the time of donation.
Sale Proceeds (FMV at Donation): 1 ETH * $4,000 = $4,000
Original Cost Basis: 1 ETH * $600 = $600
4. Capital Gain Calculation:
To calculate the capital gain, subtract the original cost basis from the sale proceeds.
In Canada, only 50% of capital gains are taxable. Therefore, you'll only be taxed on half of the capital gain.
Taxable Capital Gain: $3,400 / 2 = $1,700
Crypto Mining Tax in Canada
For crypto miners, the scale and intent of your mining activities determine the tax treatment, ranging from Capital Gains Tax to Income Tax.
Hobby Mining
If the CRA views your mining activities as a hobby, you won't pay Income Tax when receiving mined coins. However, when you later dispose of these coins, Capital Gains Tax applies, considering the cost basis of mined coins as zero.
Business Mining
For those treating mining as a business, the cryptocurrency is considered inventory. You'll pay Income Tax based on the chosen valuation method for the inventory. It's crucial to factor in costs associated with mining activities, such as electricity and equipment, on a per-coin basis.
Kryptos - Crypto Taxes Made Effortless
When it comes to airdrops and forks, clarity is key. Kryptos takes the guesswork out of the equation, ensuring your tax calculations align with the CRA's guidelines.
1. Quick Setup with Kryptos
Sign up for a FREE Kryptos account in just a minute.
Choose Canada as your base country and Canadian Dollars as your currency.
Select the adjusted cost basis method, supported by Kryptos and approved by the CRA.
2. Seamless Integration
Connect Kryptos to your wallets, exchanges, or blockchains effortlessly.
With compatibility across 3000+ DeFi protocols, you can trust Kryptos to cover your specific needs.
3. Automated Number Crunching
Let Kryptos do the heavy lifting. While you enjoy a coffee, Kryptos calculates your cost basis for every crypto asset, including popular ones like ETH, ADA, Bitcoin, and more.
Watch as Kryptos breaks down each capital gain or loss from your dispositions, along with comprehensive reports on crypto income and expenses.
4. Instant Tax Reports
Ta-da! Your data is gathered, and your full tax report is generated seamlessly.
Head to the tax reports page in Kryptos to explore your tax summary, covering net capital gains, other gains, income, costs, expenses, gifts, donations, or any lost crypto.
FAQs
1. How are Airdrops Taxed in Canada?
Airdrops are not taxed upon receipt in Canada. However, when you sell, swap, gift, or sell the airdropped crypto, Capital Gains Tax applies.
2. What is the Capital Gains Tax on Airdrops in Canada?
Capital Gains Tax is applied when you sell airdropped tokens. Only 50% of the capital gains are taxable. Calculate the tax owed based on the taxable capital gain and the applicable tax rate.
3. How are Hard Forks Taxed in Canada?
Hard forks are not taxed upon receipt. However, when you sell, swap, spend, or gift the forked coins, Capital Gains Tax applies.
4. What is the Taxation Process for Crypto Gifts in Canada?
Gifting crypto is treated as a disposition, subjecting you to Capital Gains Tax on any profit. Calculate the tax liability based on the taxable capital gain, considering only 50% of capital gains are taxable.
5. How is Crypto Mining Taxed in Canada?
For hobby mining, there's no Income Tax upon receiving mined coins. When you sell them, Capital Gains Tax applies with a zero-cost basis. For business mining, Income Tax is levied based on the chosen valuation method for the inventory, considering associated costs.
All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!
As Web3 evolves, managing a diverse portfolio has become complex. Kryptos simplifies this with advanced tools for real-time tracking, NFT management, and DeFi analytics. Discover how Kryptos turns challenges into strategic advantages for modern investors.
Struggling with crypto tax in Australia? Kryptos.io simplifies the process, ensuring accurate and compliant filings with the ATO. Track transactions and value assets effortlessly—make tax season stress-free.
Mastering Crypto Taxation: Navigate the Complex World of Digital Assets with Kryptos, the Ultimate Solution for Accurate, Efficient, and Future-Proof Tax Reporting.