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ICOs taxes, reporting, etc.

Hi Guys, congrats for the site, I'm new here.

I'm Canadian, I have an idea for an ICO, but I have a couple of questions because. I was hoping you could help me with some quick advice.

In an ICO, let's say the Ethereum type of ICOs, how do you report the money your raised in Canada if it comes from anonymous sources from all around the world. If you use the money to set up a fund for a project, that money is considered and taxed as income? loan? I'm very confused with all this, any help or if you could recommend me with a specialist in Montreal/Toronto I would appreciate it.




  • CoinGuyCoinGuy Administrator
    @Bob_G . Good questions. I'll tag a couple of people who may know:

    @BitcoinCooperative, @BitFrank , @MikeXBT

    Also you can try calling and see if they have a suggestion
  • Sorry I missed this; I got @Bob_G 's message, but figured I'd answer here for the sake of public knowledge.

    First, I should state frankly that a lot of ICOs probably aren't even worrying about that. Beside being a Bitcoin Co-op director, and NewsBTC's community manager, and that's not part of what we consult on... we don't ask, basically :p In promoting a project, we are only concerned about potential investors and users getting ripped off, not the government.

    However, there are generally two ways of going about it. Some people look at their tokens as representing a stake in your project, so for tax purposes you would try to declare it as money gained from selling equity. The SEC won't like that, though, so those companies tend to reside in safe jurisdictions and avoid the US entirely.

    I don't think you can get away with that in Ontario, and probably not Quebec, either, or even British Columbia for much longer. Instead, we focus on "appcoins," wherein the token is needed to use a service you will provide, probably by a decentralized application you are building. In that sense, you're really just pre-selling something before it came out, like how you can pre-order a video game.

    That would lead you to try and classify it as income, I suppose. Probably at the time at which you converted tokens to fiat for expenditure. I need to think about the specifics in more detail, eventually, because I'm doing one, too.
  • BruceWayneBruceWayne Member Plus
    Ok, I've been working in securities in British Columbia for quite awhile.

    First, does your project have a prospectus? If it does then you can go on to the next point.
    Does your project have an outline to what it plans to do? To the point where lawyers can't be involved? This typically means you have lawyers which are fluent in the area you are going into. And they can all say "yes, this project meets every single item which no longer makes you legally liable for misleading investors into a contract, security or legally-binding situation which may lead into losses." And you need to think of every single province you plan to offer this into.

    You can actually forego many of this by appealing to accredited investors (investors with more than $50,0000 in assets). In layman's terms this is saying that you have enough funds that a bad investment means little to you; you have the stomach to hold onto something and not lose your rent money (this is where the prospectus comes in handy). Securities regulations will fucking raid your office, home, bedroom, looking for any legally binding documents which proves a legal case.

    You *cannot* allow unaccredited investors to believe in your offering.

    Securities commissions are in place to make damn sure that you, some guy on the internet, can't dupe people into buying into your "I'm tired of not getting rich off my schemes. But I'm bound to get rich off this next scheme; and quick" because you are publicly facing. Everyone needs to know everything at all times. If you even have the slightest material leaning (something you're holding from the public but can get rich from) then your ass will be fined.

    If you can work your way into securities law and make a case for an IPO for what you are doing then by all means, do so. But this is such a grey-area that any sane-person will never do so. At the same time it's the age old question:

    If I can afford it, I won't ask the price.
  • Bob_GBob_G Member
    Hi Bruce,

    Thanks for such a complete answer.

    It seem to me, though, that what you described fits into a regular hedge fund project.

    What if this fund didn't accept cash, but crypto tokens only from anonymous people from around the world?

    I'm thinking about several projects, but one of them is replicating what ICONOMI did with an index and a hedge fund. It seems that they got around the securities authority by not accepting cash. And once they convert part of their profits to cash in their jurisdiction it seems (I don't know for sure) that the income is reported under consulting fees and they pay ordinary taxes.

    Is this possible in Canada? Or should I just move to another jurisdiction for projects like this one and not accept investment from Canadian IP addresses?



    PS. By the way, I'm a Finance guy, specialized in fund management, currently studying PhD, I'm looking for a technology partner, someone who's an expert in Solidity and ethereum smart contracts in general, for future CTO. If you knew anyone I would appreciate the contact. Thanks!
  • BruceWayneBruceWayne Member Plus
    @Bob_G does your project accept funds which have a tangible cash position?

    If you are selling to Canadians (and more importantly, to people in a particular province) do you meet the requirements to that particular province. Like, if you were to sell an item which you bought wholesale, typically you'd need a certificate stating that you are registered to collect taxes from that particular government to lawfully accept payment, and, transmit due funds.

    If you are selling your instrument to just anyone, then yes, you are massively on the hook for providing regular updates along with any material adjustments to your asset/company/fund. Regulatory commissions very from province to province, and none have the the same believes/mandates/rules. BC/Alberta/Ontario and Quebec are typically the largest ones, since Canada is a largely commodities based economy.

    Please note I'm not a lawyer. I just happen to spend a lot of time around lawyers. Everything is subject to your jurisdiction, and your legal council's advice. You get what you paid for.

    There is no Canadian securities commission (many think there should be, but everything is province by province). The states are the same; what might fly in one state is illegal in another (think recreational pot).

    As a programmer who works almost exclusively in this space, and someone who's worked in securities well before entering in this space, it's much easier to write it, and sell it. If it's worth as much as you think it is then someone else will buy it and figure out the details. I can easily write my own coin, but I won't, just because I dropped out of high-school in 1999 during the .com bubble, and legal actually matters a lot, particularly if you are new in an area.
  • barehunterbarehunter Member Plus
    Your ico idea better be good. Everyone and their dog are creating eth based ico schemes. Can't blame you for trying to get a piece of the pie but you may be late.

  • Bob_GBob_G Member
    You seem to be making at least two uninformed assumptions about my intentions. But thanks for your comment.
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