Taxing NFTs and Digital Collectibles – A Complete Guide by a Montreal CPA Firm Near You

Introduction

NFTs (non-fungible tokens) and digital collectibles have transformed the digital economy, artistic markets, gaming ecosystems, and online ownership. But while the technology is new, the tax obligations are not. The Canada Revenue Agency (CRA) treats NFTs as taxable property, and every transaction—whether you mint, buy, sell, swap, or earn NFTs—can trigger income tax. Many Canadians mistakenly believe NFTs are anonymous or “outside the tax system,” but CRA uses blockchain analytics, foreign reporting agreements, and platform data to identify non-compliance. This guide explains exactly how NFTs are taxed in Canada and how creators, investors, and traders can stay compliant.

Legal and Regulatory Framework

CRA treats NFTs as property for tax purposes under the Income Tax Act. NFT transactions may be taxed as capital gains (for investors) or business income (for creators, frequent traders, or commercial participants). All NFT sales, swaps, mints, and transfers that result in a change of beneficial ownership are taxable dispositions. GST/HST may apply to NFT sales if supplied in the course of a commercial activity. NFTs held on foreign platforms may trigger T1135 foreign reporting if cost thresholds exceed $100,000 CAD.

Key Court Decisions

Although NFTs are new, relevant principles come from crypto and digital asset cases. In Zhang v. Canada, the court confirmed that crypto-to-crypto swaps are taxable dispositions—this applies equally to NFT trades. In Douglas v. Canada, CRA penalties were upheld for failure to report digital assets on foreign platforms. In Thompson v. Canada, courts reiterated the taxpayer’s duty to maintain records for digital transactions. These decisions show CRA’s strict approach to digital assets, including NFTs.

How NFT Transactions Are Taxed

NFTs can trigger tax in two different ways depending on your activity:
1. Capital Gains (Investor): When you buy an NFT as an investment and sell it later, 50% of the gain is taxable.
2. Business Income (Creator/Trader): When you mint NFTs, sell them as part of a business, flip NFTs frequently, or operate commercially, 100% of income may be taxable as business revenue.
CRA examines factors such as frequency, intention, organization, promotion, and time spent to determine whether you are a business or investor.

Minting and Selling NFTs (Creators)

If you create NFTs, your income is generally treated as business income. Minting costs, platform fees, gas fees, design expenses, and software subscriptions may be deductible. When you sell an NFT, the fair market value of the crypto you receive (in CAD) is fully taxable. If you later sell the crypto received, a separate capital gain (or loss) occurs.

Buying and Selling NFTs (Investors)

Buying and reselling NFTs is usually taxed as capital gains, unless trading becomes commercial. Gain = proceeds minus adjusted cost base minus selling fees. Each swap between NFTs or between NFTs and cryptocurrency is a taxable disposition. Gas fees must be tracked and added to ACB or deducted from proceeds.

NFT Royalties

Many NFTs generate ongoing royalties for creators. These are fully taxable as business income at the time received, based on the crypto’s fair market value in CAD.

NFTs Held on Foreign Marketplaces

NFTs stored on foreign platforms (OpenSea, Blur, Magic Eden, Binance NFT, etc.) may qualify as specified foreign property. If your foreign digital assets exceed $100,000 CAD in cost, a T1135 filing is mandatory. CRA penalizes late filings heavily, even if no tax is owing.

GST/HST and NFTs

NFT sales may be subject to GST/HST if:

• you are in the business of creating or selling NFTs

• the purchaser is in Canada
  NFTs are considered intangible supplies. If your total taxable supplies exceed $30,000 in a 12-month period, GST/HST registration becomes mandatory.

Record-Keeping Requirements

CRA expects detailed records for every NFT transaction: acquisition dates, dispositions, cost basis, gas fees, platform fees, wallet addresses, transaction IDs, FMV in CAD, and smart contract details. Blockchain records alone are not considered full documentation without proper valuations and CAD conversions.

Common CRA Audit Triggers

NFT users often get audited for: large unreported crypto wallets, high-volume trading, NFT royalties not reported, swaps not recorded as dispositions, profits inconsistent with tax returns, foreign platform use, missing T1135 filings, or transactions involving stablecoins or DeFi platforms linked to NFT purchases.

Mackisen Strategy

At Mackisen CPA Montreal, we help NFT creators, traders, and investors stay compliant while minimizing tax. We calculate adjusted cost bases for complex transactions, reconstruct wallet histories, prepare T1135 filings, determine whether income is capital or business, structure NFT businesses tax-efficiently, optimize GST/HST obligations, and defend clients during CRA audits. Our digital asset expertise ensures accuracy and full compliance.

Real Client Experience

A Montreal NFT artist earning royalties on Ethereum avoided penalties after we rebuilt her transaction history and filed corrected returns. A high-volume NFT trader classified incorrectly as capital gains switched to business reporting after our review, preventing reassessment. A collector with NFTs across foreign platforms avoided T1135 penalties through timely compliance. A gaming-industry creator operating NFT avatars optimized GST/HST and reduced taxes through proper structuring.

Common Questions

Are NFTs taxable? Yes—always, when sold or swapped. Do NFT gifts trigger tax? Yes—gifting is a disposition. Are gas fees deductible? Yes—either added to ACB or deducted from proceeds. Are NFT royalties taxable? Yes—100% as business income. Do NFTs trigger T1135 reporting? Yes—if held on foreign platforms and cost exceeds $100,000.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal ensures NFT creators and investors understand their tax obligations fully. We reduce audit risk, maximize deductions, and provide expert digital asset tax planning in a fast-changing environment.