The New Zealand Inland Revenue Department has put forward new proposals on the goods and services tax (GST) policy related to cryptocurrency and is seeking public feedback on this issue.
On February 24, the New Zealand Inland Revenue Department (IRD) released a document containing proposals to improve and simplify tax invoice requirements and to exclude cryptocurrency from specific GST provisions.
Minimize distortions in the cryptocurrency Market
The paper acknowledges that New Zealand’s crypto asset market is developing rapidly and it is expected that most stakeholders will welcome the proposed regulation or recommend broader tax and regulatory reforms. The country’s tax system claims to be designed to ensure that tax rules do not pose an obstacle to the development of cryptocurrency related industries. The newspaper wrote:
The definition of “tax-free supplies” for monetary or financial services (meaning they are not subject to GST) does not consider encryption assets, which means that GST can be imposed on certain types of encryption assets, but not on other types of assets – depending on their specific use and design. This unfair tax treatment of goods and services unintentionally favors some types of encryption assets and excludes others, which is likely to lead to distortion of the encryption asset market. “
What about income tax?
Specifically, regulators recommend exempting cryptocurrency from GST rules and financial engagement rules, while cryptocurrency related services (such as exchange services and mining) will continue to be subject to existing GST and income tax rules. At the same time, users of some encrypted assets will have to pay income tax for unrealized gains and losses.
GST will continue to apply to the supply of goods and services purchased in cryptocurrency, according to the report:
“The proposed GST changes apply only to the supply of crypto assets. Other services related to encrypted assets, which do not provide encrypted assets themselves, such as mining, providing encrypted asset trading services or consulting, general business services or computer services, will continue to comply with the existing GST rules. “
The agency suggested that simple and clear tax rules would help promote the development of the country’s cryptocurrency industry, as they would ensure that cryptocurrency investors and businesses would not be disadvantaged by the treatment of such assets.
As a result, the agency asked the public to provide feedback on the recommendations made in the document and comment on potential options for the disposal of cryptocurrency.
Concerns of the government
Although New Zealand is trying to build itself into a cryptocurrency friendly country, Naomi Ferguson, the head of the international tax office, made it clear that the New Zealand government does not consider cryptocurrency a currency:
“In the view of members, encrypted assets are property. Encrypted assets are not as “money” as people usually think (at least not so far). In particular, since encrypted assets are not issued by any government, they are not legal targets anywhere. “
Editor in charge: CT