Introduction
Yield farming, a strategy where investors lend or stake their cryptocurrency to earn rewards, has specific record-keeping requirements under Canadian tax law.
Maintaining detailed and accurate records is essential for proper tax reporting and compliance with CRA regulations.
What to Record
Investors must keep comprehensive records of all yield farming transactions. This includes the date of each transaction, the type of digital assets involved, the value of the assets in Canadian dollars at the time of the transaction, and the purpose of the transaction (e.g., lending, staking, earning rewards).
Transaction Details
Each yield farming activity should be documented, including the platform used, the duration of the staking or lending period, and the amount of rewards earned.
Additionally, any fees associated with the transactions should be recorded, as they may be deductible expenses.
Tax Reporting
Accurate records are necessary for reporting yield farming income as either business income or capital gains.
The CRA may audit yield farming activities, and detailed records will be crucial in supporting the reported income and expenses. Inadequate record-keeping can lead to reassessments and penalties.
Conclusion
Proper record-keeping is vital for anyone engaged in yield farming. By maintaining detailed records, investors can ensure compliance with Canadian tax laws and avoid potential issues during CRA audits.
If you have any questions or require further assistance, our team of accountants at Tax Partners Oshawa can help you.
Please contact us by email at [email protected] or by phone at 905-448-2241 for a FREE initial consultation appointment.
You may also visit our website (taxpartnersoshawa.com) to learn more about other services we offer in Canada, US and abroad.