In CRA’s view, on whether digital currency, including Bitcoins, are considered “specified foreign property” under the foreign property reporting rules in section 233.3 of the Income Tax Act.
Under the foreign property reporting rules in the Income Tax Act, if a Canadian taxpayer owns certain foreign property the aggregate cost of which exceeds $100,000 CDN, the taxpayer must file a Form T1135 on which the amount of “specified foreign property” is reported. “Specified foreign property” is defined in subsection 233.3(1) to include certain tangible or intangible property held outside Canada, provided that the property is not held or used exclusively in carrying on an active business.
It is important to include in your accounting the costs involved with foreign property, because once you go over the 100k, you will then need that information.
Further, an interest in a partnership that owns or holds specified foreign property would itself be specified foreign property unless the partnership was a “specified Canadian entity.”
It is important to recognize that Bitcoins should not be used to save taxes. To do so is to invite future problems, tax, penalties and interest. This is your reminder of the many tax issues that arise in respect of digital currency and the reporting of foreign property.