The New Zealand tax authorities have made new proposals on the goods and services tax policy (GST) with regard to cryptocurrencies and require public feedback on this subject.
On February 24, the Inland Revenue Department (IRD) of New Zealand published a paper with proposals for improving and simplifying tax invoice requirements and excluding cryptocurrencies from specific GST provisions.
The document admits that New Zealand has a fast-growing market for crypto assets and expects most stakeholders to welcome the proposed regulations, or propose broader tax and regulatory reforms. The country’s tax system is apparently aimed at ensuring that the tax rules do not constitute an obstacle to crypto-related developments. The newspaper reads:
“The definitions used for money or financial services as” exempt deliveries “(meaning that they are not covered by GST) did not cover crypto assets, meaning that GST can be imposed on certain types of crypto assets, but not to others – depending on their particular purpose and design. This unequal GST treatment inadvertently favors certain types of crypto assets over others and is likely to cause a disruption in the crypto asset market. “
Specifically, the regulator proposes to exempt cryptocurrencies from both GST and financial settlement rules, while crypto-related services – such as exchange services and mining – remain subject to existing GST and income tax rules. At the same time, users of certain crypto assets will have to pay income tax on unrealized gains and losses.
GST will still be applied to deliveries of goods and services purchased with cryptocurrencies, the article states:
“The proposed GST changes would only apply to deliveries of crypto assets. Other services relating to crypto-assets, which are not in themselves a supply of crypto-assets, such as mining, offering crypto-assets exchange services or providing advice, general business services or computer services remain subject to the existing GST rules . “
The agency suggests that simple and clear tax rules will contribute to the growth of the country’s crypto sector, as they can ensure that crypto investors and companies are not disadvantaged by dealing with such types of assets.
As such, the agency asks the public to provide feedback on the proposals in the paper and to comment on the possible approaches to dealing with cryptocurrency.
While New Zealand is trying to establish itself as a crypto-friendly country, IRD Commissioner Naomi Ferguson has made it clear that the New Zealand government does not consider crypto as a currency:
“According to the commissioner, crypto assets are owned. Crypto assets are not ‘money’ as is generally understood (at least not at the moment). Because crypto assets are not issued by any government, they are nowhere legal tender.”