As is the case in certain countries, New Zealand views cryptocurrency as a form of property. Just like other products in the same category, a goods and services tax (GST) must be applied when crypto changes from one person or entity to another. However, the government has discovered that, when applied, this rule leads to the possibility that crypto might be double taxed due to the application of a requisite income tax, and is now looking at whether or not crypto needs to remain included in the 15% GST tax regime.
The New Zealand Inland Revenue Department (IRD) published an update (in pdf) to its GST policy issues this week, asserting that the double taxation situation is “unfavorable” and could be removed. However, it specifies that crypto would still be included when calculating income taxes. The IRD explains in its update, “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 wouldn’t be all-inclusive – some transactions and sales could still be required to pay taxes twice. One of these examples is a share that provides an “interest in a foreign company or partnership.”
The IRD further states that, by relaxing the rules, crypto innovation will be enhanced and the space will be allowed to grow more rapidly. It expects that those in the industry will no longer be disadvantage from issuing or selling digital currencies in the country,