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Bitcoin users face a global patchwork of inconsistent tax treatment

Tax authorities around the world have yet to develop a uniform approach to the taxation of Bitcoin

Tax authorities around the world continue to wrestle with issues arising from the use and sale of Bitcoin currency. The Canada Revenue Agency (CRA) and the US Internal Revenue Service (IRS) have both announced that Bitcoin is not a currency for tax purposes. Other jurisdictions have taken different approaches.


In recent publications (see CRA Document No. 2013-0514701I7 “Bitcoins” (December 23, 2013) and CRA Document No. 2014-052511E5 “Virtual Currencies (Bitcoins)” (March 28, 2014)), the CRA summarised its views on how certain transactions involving the use, sale or mining of Bitcoins may be taxed under Canada’s Income Tax Act and Excise Tax Act.

For example, the CRA stated that the use of Bitcoins to purchase goods or services would be treated as a form of barter transaction. If a business sells goods or services in exchange for Bitcoins, that business must report its income from the transaction in Canadian dollars (that is, the fair market value of the Bitcoins at the time of the sale). Goods and services tax (GST) and/ or harmonised sales tax (HST) would be applicable on the fair market value of the Bitcoins that were used to pay for the goods or services.

The trading or sale of Bitcoins like a commodity (that is, speculating on the changes in the value of Bitcoins) may result in a gain or loss on account of income or capital. This determination can only be made on a case-by-case basis and on the specifics facts of each situation.

And if a taxpayer mines Bitcoins in a commercial manner, the taxpayer’s income for the year from such mining activity will be determined with reference to the property in the taxpayer’s inventory at the end of the year.


In Notice 2014-21 (March 25 2014), the IRS stated that Bitcoin is property and not currency for tax purposes. According to the Notice, “general tax principles applicable to property transactions apply to transactions using virtual currency”. Some of the US tax implications of Bitcoin include:

  • Taxpayers receiving Bitcoins as payment for goods or services must include in their gross income the fair market value of the Bitcoins;
  • Taxpayers will have a gain or loss upon the exchange of Bitcoins for other property; and
  • Taxpayers who “mine” Bitcoins must include the fair market value of the Bitcoins in their gross incomes.

The IRS also confirmed in its statement that employment wages paid in Bitcoins are taxable.

Aside from the recent IRS’s recent guidance on Bitcoin, the Foreign Account Tax Compliance Act (FATCA) and other offshore reporting requirements also have an impact on holders of Bitcoin in non-US accounts and the financial institutions that host these accounts.

Other jurisdictions

Numerous jurisdictions have taken positions similar to Canada and the US that Bitcoin is property, not a currency, for tax purposes (that is, France and Australia). Sweden, Norway, Finland, and Denmark all follow the property approach. Germany has labelled Bitcoin “private money” or a “unit of account,” subject to capital gains tax. On the other hand, while the EU is working toward consistent treatment of digital currencies, the UK has recently announced that it will treat Bitcoin and other virtual currencies similarly to traditional currencies.

As Bitcoin and other virtual currencies continue to gain traction, international taxing authorities may need to consider a consistent approach to the taxation of such currencies. It remains to be seen which view of Bitcoin — asset, currency, or some third way— will prevail for tax purposes.

Timothy Fitzsimmons ( is a partner in the Toronto office; and
Laura Gavioli ( is a member in the Dallas office of Dentons, the principal global correspondents for the tax disputes channel of

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