New Zealand thinking carefully about GST on cryptocurrency transactions

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New Zealand consider cryptocurrency as a form of property. Thus, it is opinions that a goods and services tax (GST) must be applied when cryptocurrency changes from one person or entity to another. However, the government discovered that this rule leads to the possibility that crypto might double the taxes due to the application of a requisite tax and is considering whether or not crypto needs to remain included in the 15% GST tax regime.

The New Zealand Inland Revenue Department (IRD) published that this double taxation situation is “unfavourable” and could be removed. However, it specifies that crypto would still be included when calculating income taxes.

The IRD explains,”Because of their innovative nature, [cryptocurrencies] will often also have different features to other investment products.

This means that some existing tax rules can be difficult to apply, involve very high compliance costs or may provide policy outcomes for some crypto-assets that lead to over-taxation compared to other alternative investment products”.

“The proposed changes would not be all inclusive , some transactions and sales could still be required to pay taxes twice. By relaxing the rules, crypto innovation will be enhanced and the space will be allowed to grow more rapidly.

It expects that the industry will be no longer be an disadvantage from issuing or selling digital currencies in the country, and that the change will enable increased investment and business growth.

The current GST rules provide an uncertain and variable GST treatment making, using or investing in crypto-assets less attractive than using money or investing in other financial assets”.

“Requiring the financial arrangement rules to be applied to some crypto-assets would lead to accrual-based taxation on large unrealised gains and losses from cryptoasset values, which can be very volatile.

It could bias investment decisions about which types of crypto-assets New Zealand investors may prefer to invest in, if some tokens are only taxed on realised gains or losses when they are sold or exchanged for other tokens, and others that are subject to tax on accrued gains or losses”.

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