Inland Revenue (IRD) in New Zealand is intensifying its focus on cryptocurrency tax compliance. With 227,000 crypto users conducting 7 million transactions worth $7.8 billion, IRD is honing in on those not declaring income from crypto activities.
Understanding Cryptoassets: Tax Implications and Compliance in New Zealand
Cryptoassets, also known as cryptocurrencies or virtual currencies, are considered property for tax purposes, making any income from selling, trading, or exchanging them taxable.
Cryptoassets are considered property for tax purposes, with tax treatment depending on their characteristics and use rather than their name. While buying or selling cryptoassets isn't subject to GST, GST applies when cryptoassets are received as payment for regular business activities. Additionally, cryptoassets are not classified as financial arrangements.
In 2020, Inland Revenue (IR) updated its guidelines on the tax treatment of cryptoassets in New Zealand. Late last year, IR contacted high-risk customers, offering them a chance to address non-compliance issues before facing audits.
IR spokesperson Trevor Jeffries announced that another round of letters has just been sent out.
IRD Enhances Crypto Tax Compliance Amidst Rising Values
“Data we have has helped us identify customers who are not paying their tax. That data is also now being used to identify customers with significant cryptoassets.
“Inland Revenue has identified 227,000 unique cryptoasset users in New Zealand undertaking around 7 million transactions with a value of $7.8 billion.
“Cryptoasset values have reached new highs, so now is a good time for people to think seriously about tax on their cryptoasset activity. The high value also means customers are well positioned to pay their tax for the 2024 tax year and earlier.
“If people are making money from crypto they should be thinking about their tax obligations on this income and the risks of not declaring all related taxable activities.
“To help with that, IR provides extensive guidance to help customers assess their situation. Where necessary, people can also seek advice from an independent tax advisor.
“We want customers and tax agents to know that we are stepping up our compliance activities for customers with cryptoassets. Despite popular thinking – people are not invisible on blockchain, and we have the tools and the analytics capabilities to identify and expose cryptoasset activities.
“We are applying those analytics capabilities and using data received from exchanges, both here and overseas. IR has signed up to the cryptoasset reporting framework. That means New Zealand works closely with other tax jurisdictions and will get more data on customers’ cryptoasset transactions outside New Zealand.”
In summary, Inland Revenue (IRD) is increasing efforts to ensure tax compliance among cryptocurrency users in New Zealand. Using data analytics, IRD identified 227,000 crypto users conducting $7.8 billion in transactions.
With rising crypto values, taxpayers are urged to declare all crypto-related income. Recent letters were sent to non-compliant customers, and IRD emphasizes that blockchain activities are traceable. IRD collaborates internationally to track undeclared crypto assets and offers extensive guidance for taxpayers.
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