Cryptolicense in Canada: Open New Business Gates

Companies that want to engage in cryptocurrency-related activities are required to obtain a license from FINTRAC and comply with a number of requirements, such as:

• filing reports with FINTRAC
• record keeping
• KYC and compliance

A MSB is an individual or legal entity with a place of business in Canada that provides at least one of the following services:

• operations with foreign currency, i.е. conducting transactions in which one type of currency is exchanged for another
• transfers of funds, including between individuals, legal entities, including through the network of electronic money transfers, i.e. transfer of funds from one person or entity to another using an electronic money transfer network or any other method such as Hawala, Hundi, Fei Chien, Chitti
• issuance or redemption of cash and traveler's checks or other similar negotiable instruments, with the exception of checks payable to a specified individual or legal entity
• operations with cryptocurrencies, i.e. cryptocurrency exchange and cryptocurrency transfer services

The following mandatory requirements must be met in order to obtain a cryptolicense and operate in Canada:

• have a detailed business plan
• have the necessary AML/CTF policies
• share capital - no mandatory requirements
• provide passport, address, resume of founder (Canada is not a party to the Hague Convention, so legalization of foreign documents is required)
• no requirements for a local director
• appoint an AML officer who may be located outside of Canada
• prepare founding documents, memorandum and articles of association of the company

• Rate: 15% federal, plus provincial/territorial rates ranging from 8% to 16% (not deductible for federal CIT purposes). Combined rates range from 23% to 31%
• Who pays: resident and non-resident corporations carrying on business in Canada
• Taxable income: profits earned from business activities in Canada
• Filing deadline: six months after the company's taxation year end
• Payment deadline: instalments throughout the year, final payment six months after year end

• Rate: varies depending on the type of payment and recipient's residency. Generally 25% for non-residents, but can be reduced by tax treaties
• Who pays:payers of certain types of income to non-residents, such as royalties, dividends, and interest
• Filing and payment deadline: Generally, within 15 days of the payment date

• Rate: 50% of capital gain included in income and taxed at regular income tax rates (individual or corporate)
• Who pays: individuals and corporations disposing of "taxable Canadian property," including real estate, business assets, and some shares
• Holding period: no requirement
• Filing deadline: same as income tax return due date (April 30 for individuals, six months after year end for corporations)

Canada is a federation and consists of 10 provinces and 3 territories. Therefore, all personal and legal entity taxes are levied at both the federal (national) and provincial (local) levels.

FINTRAC considers cryptocurrencies to be commodities, so transactions with them are treated as commodity exchanges. Since 2013, FINTRAC has started taxing cryptocurrency transactions as capital gains or business income under the Income Tax Act.

When cryptocurrencies are taxed as business income, 100% of the income is taxed, capital gains are only taxed at 50%. At the same time, taxpayers must report the full amount of income received from cryptocurrency transactions.