Simon Proulx Alicia Malone April 1 2022 Draft tax legislation: cryptoasset mining KPMG Law | Corporate Tax - Canada Simon Proulx, Alicia Malone Corporate Tax IntroductionCryptoasset miningCommentIntroductionTaxpayers may want to review proposed changes to the interest expensing rules and other significant new draft tax legislation that was recently issued by the Department of Finance (Finance). This extensive package of legislation, which was released on 4 February 2022, features a wide range of corporate, personal and trust tax changes.This article looks at the proposed changes to cryptoasset mining. For further details of other changes, please see:"Draft tax legislation: limitations on deductible interest expense and other measures";"Draft tax legislation: mandatory disclosure";"Draft tax legislation: trust reporting"; and"Draft tax legislation: immediate expensing".Finance has released these draft measures for public consultation and will accept feedback by the deadlines specified for each measure.Cryptoasset miningFinance's draft legislation proposes to essentially deny input tax credits for many inputs related to mining activities of cryptoassets, including making payments for mining. In general, the legislation specifies that these activities would not be considered as "supplies" for goods and services tax and harmonised sales tax purposes, and inputs into mining activities would be deemed acquired otherwise than in the course of commercial activities. These proposed changes have generally applied since 5 February 2022. Finance will accept comments on the draft legislation until 5 April 2022.CommentThe definition of "mining activity" in the draft legislation is very broad and it appears to include activities that are not otherwise considered "mining" in the industry, such as controlling access to a digital ledger or selling access to computing resources. The definition of "cryptoasset" also appears to be broad enough to include not only cryptocurrencies, but also non-fungible tokens, coins and smart contracts. Businesses that operate mining activities of cryptoassets could face additional tax costs between 5% and 15% on some of their operation costs, including electricity costs, depending on the province in which they operate. Businesses could also face additional tax costs related to change of use rules of certain assets that have been owned as of 5 February 2022.For further information on this topic please contact Simon Proulx or Alicia Malone at KPMG Law by telephone (+1 416 777 8000) or email ([email protected] or [email protected]). The KPMG Law website can be accessed at www.kpmg.com.