New Zealand’s Inland Revenue department appears to be taking a firmer stance against cryptocurrency traders and companies who use them, reminding them of their tax obligations.
Tony Morris, IRD customer segment leader, explained that the company is taking the necessary steps to avoid individuals misusing the system, reports RadioNZ.
People who may be non-compliant … are something we’re looking at, and how we can improve the information we get and work closely with international authorities to work out how we can best do that.
Due to a rise in the number of enquiries that the IRD has received regarding cryptocurrency tax, it has set up a FAQ website aimed at answering the most common questions. As with most authorities, the IRD has stated that ‘for tax purposes, cryptocurrency is property, not currency.’
It also states that if a company accepts cryptocurrency that has been received as a payment for goods and services this is deemed a business income. As such this is taxable. It adds that records will need to be maintained to determine a person or company’s deductions and income, with the standard seven-year record keeping requirements being applied.
As tax rules have been around for some time and the cryptocurrency market is relatively new, with questions regarding its tax implications on the rise, Morris states that there is ‘not always an obvious answer,’ adding:
It’s still early days on the policy and legislative front … we’re looking at the whole policy settings around this and other things, so too early to say whether we would – but we’re certainly looking at what might be needed going forward.
Whether or not this is a good thing remains to be seen. However, it’s likely that people who sold their coins instead of hodling on to them will be faced with a bill they may not have even considered.
The Australian government is also taking steps to track down investors who are liable to pay tax on their cryptocurrency investments.
For many the idea of paying tax on their digital currency assets may not have been a consideration until recently. At the end of December, the cryptocurrency market saw a surge in value, pushing bitcoin’s value to within touching distance of $20,000 for the first time. Many holders had plenty to celebrate, and may, subsequently, have sold their coins or traded them for others. As a result, the gains and losses they would have received are taxable, which some are only starting to think about now.
Yet, with market prices on the decline since the end of last year there will be a many faced with a large tax bill during this tax season. A report from LBN suggested last month that with the U.S. Internal Revenue Service (IRS) working at chasing bitcoin tax investors new investors may have been selling their coins as they don’t have enough to pay their tax bills.
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