Canada is set to become one of the first countries to adopt the International Crypto Asset Reporting Framework (CARF) for tax purposes by 2026, as outlined in the supplement to the country’s 2024 annual budget, as reported by National Post on April 16.
The Organization for Economic Cooperation and Development (OECD) agreed to the framework in August 2022, and it is expected to be implemented in 47 countries by 2027, as promised in November 2023.
“Just as cryptocurrencies pose a financial risk to middle-class Canadians, the rapid growth of cryptocurrency markets poses a significant risk of tax evasion,” states the 2024 federal budget. “Regulations and international tax exchanges must keep pace with the risks of tax evasion to ensure a fair tax system.”
Impact on Canadian crypto service providers
CARF imposes new reporting requirements on “crypto asset service providers” (CASPs), including cryptocurrency exchanges, brokers and ATM operators. Stablecoins, derivatives issued as crypto tokens and non-convertible tokens (NFTs) are included there as examples of “crypto assets.”
Providers of such services, such as exchanges and ATM operators, will be required to report various transactions to the CRA. This includes crypto-to-fiat and crypto-to-crypto transactions, as well as any cryptocurrency transfers exceeding $50,000, which includes payment processing activities.
CASP entities must also collect information about their customers, including “name, address, date of birth, jurisdiction(s) of residence, and taxpayer identification numbers for each jurisdiction of residence.” Transactions of both Canadian residents and non-residents will require reporting.
“The 2024 budget proposes to provide $51.6 million over five years, beginning in 2024-25, and $7.3 million annually to the Canada Revenue Agency to implement and administer these initiatives,” the budget reads.
Canadian capital gains tax increase
The budget plan also includes a proposal to raise the capital gains tax rate from 50% to 66% for annual income in excess of $250,000. This change, which applies to the sale of cryptocurrencies, has raised concerns among the Canadian cryptocurrency community.
