New Zealand’s tax authority has issued new proposals on the Cryptocurrencies-related goods and services tax (GST) policy and is seeking public feedback on the issue.
New Zealand’s Inland Revenue Department (IRD) released a paper that includes proposals to improve and simplify the requirements for tax invoices and exclude cryptocurrencies from specific GST provisions.
Minimizing Crypto Market Distortion
The document reveals that there is a fast-growing crypto-asset market in New Zealand and expects most stakeholders to welcome the proposed regulations, or suggest wider tax and regulatory reform. The tax system in the country ostensibly aims to ensure that the tax rules do not create barriers to crypto-related developments.
The paper reads: “The definitions used for money or financial services as “exempt supplies” (meaning they are not subject to GST) did not contemplate crypto-assets, meaning GST may be imposed on certain types of crypto-assets, but not others – depending on their particular purpose and design. This inequitable GST treatment is unintentionally favouring certain types of crypto-assets over others and likely resulting in a distortion in the crypto-asset marketplace.”
What To Do With Income Tax?
In particular, the regulator proposes to exempt cryptocurrencies from both the GST rules and the rules on financial arrangements, while crypto-related services–such as exchange services and mining–will continue to be subject to existing GST and income tax rules. Simultaneously, users of some crypto assets will have to pay income tax on unrealized gains and losses.
GST will still apply to goods and services purchased using cryptocurrencies, the paper states:
“The proposed GST changes would only apply to supplies of crypto-assets. Other services related to crypto-assets, that are not in themselves supplies of crypto-assets such as mining, providing crypto-asset exchange services or providing advice, general business services or computer services will continue to be subject to the existing GST rules.”
Concerns Of New Zealand Government
While New Zealand is attempting to establish itself as a crypto-friendly country, IRD Commissioner Naomi Ferguson has made it clear that the Government of New Zealand does not regard crypto as a currency:
“In the Commissioner’s view, crypto-assets are property. Crypto-assets are not ‘money’ as commonly understood (at least not at the present time). In particular, because crypto-assets are not issued by any government, they are not legal tender anywhere.”
In a related context, the Bitcoin Cash (BCH) community has split once again over the initiative of implementing a miner tax. However, a large number of BCH enthusiasts are worried about the decision.