Domain Register In Canada
What part of a website qualifies as a capital asset in Canada?
I have someone interested in buying a website that I (my company) owns. But my Accountant has told me that If I sell it, I would have to pay $250,000 in capital gains tax. I don’t really get how this is a capital asset. It’s electrons flying through hyperspace…
I don’t see how this should be treated any different than if I were to sell a widget. If I buy a widget, it becomes an asset of mine. If I sell that widget for 3x what I paid for it, that is considered a sale, not a capital gain. And I only pay tax on the profit I made, if any, and only after I factor in all my expenses.
So what qualifies this as a capital asset? The Domain? The Registered Users? The Source Code? The Traffic? The Google Page Rank? The Brand Name? The Database? Or is it a combination of everything?
I don’t see how this is any different than a widget.
Your accountant is right. Your website is an eligible capital expenditure. This is property that does not physically exist but gives you a lasting economic benefit. Like a franchise or a license.
Your expenses with regard to the website construction have already been deducted previously, so you have not created a BASIS in the website. Meaning the sale of the website is pure profit. Widgets are inventoried: this is different.
The fact that it’s capital gain is a GOOD thing, since you are only taxed on HALF the gain, as opposed to current income, which is taxed on the whole thing.
Read this for more info:
http://www.cra-arc.gc.ca/E/pub/tg/t4002/t4002-e.html#P1612_149281
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