Crypto Tax Guide
Cryptocurrencies are digital assets created by using encryption algorithms. They can be used both as currency and virtual accounting systems. One should have a cryptocurrency wallet if interested in investing in it.
New Zealand is a developing country with a large number of crypto investors. The government is now imposing taxation rules with the increasing popularity of digital currency.
Below is the information about the crypto tax guide in New Zealand.
What are crypto assets?
The government of New Zealand imposed taxation guidelines on crypto assets. The list of all the crypto assets is given below.
- Virtual currencies: It is a digital representation of values in electronic form. Virtual currencies are a subset of digital currencies. They have faster transactions and are easy to use.
- Digital tokens: Tokens are generated and distributed through the initial coin offerings. They are the assets within the blockchain of a specific platform. They can be represented as utility tokens, security tokens and value tokens.
- Digital financial assets: The assets present in the digital forms are known as digital financial assets.
- Cryptographic assets: They are digital assets that use cryptography and can be used as investments.
- Cryptocurrencies: It is a digital currency that works on decentralised networks based on blockchain technology.
How is taxation on cryptocurrency calculated?
One should pay the taxes if they use it in different transactions related to buying or selling or as a payment for business properties. So, cryptocurrency is taxed as a business income.
The aspects mentioned below are used to calculate the cryptocurrency tax.
- Bank statements and exchange records.
- The number of units of each crypto asset is recorded at the beginning and end of the year.
- The total transactions in NZD.
- The total number of units purchased.
- Information about the mode of transactions used.
- The exact date of the transaction.
- The type of crypto asset used for investments.
Crypto tax guide for individuals
According to the official guidelines issued by the New Zealand government, one should file the tax return and pay IRD on or before the end of the tax year, 31st March, if their activities are covered under the taxable events. The list of taxable events is:
- Exchange of cryptocurrency for a government-issued currency known as fiat money.
- Using crypto for property, services or goods.
- If one receives mined or forked cryptocurrency, they are liable to pay taxes.
In addition, the non-residents must pay the cryptocurrency tax only if they have an income source from New Zealand. At the same time, the residents will be taxed on their income, including crypto assets traded in NZD.
Crypto Taxation guide for businesses
Businesses using crypto assets must pay taxes according to the guidelines given by the government of New Zealand to avoid any problems. In addition, they have to pay the standard PAYE and fringe benefits taxes.
The companies or businesses paying their employees through crypto assets should pay the PAYE or FBT. The rulings passed by the governments related to the PAYE and FBT are as follows:
- BR Pub 21/01 states that crypto assets received by a business or company employees are subject to PAYE. This ruling will be applied from 1st March 2021 till 1st December 2022.
- BR Pub 21/02: It states that if the employees receive the crypto assets as a bonus, they will be subjected to PAYE.
- BR Pub 19/03: It states that FBT applies to all the cases where the crypto assets issued by an employer are given to the employee. It will be used for three years starting from 30th July 2019.
Cryptocurrencies are digital money or popularly known as modern-day currency. With the increase in investment trends, people are diverting their hard-earned money in cryptos. One should adhere to the crypto tax guide if they are investing. The trading space is expanding, and one needs to be attentive to the regulatory framework. The government of New Zealand imposed taxation rules on all the residents and non-residents using crypto assets. So one should adequately calculate their taxes before applying, including all the income and expenses. In case of any issue, you can take advice from professionals.