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Cryptocurrency Guidance from IRD

Business, Sale & Purchase

The IRD has just issued some new guidance on cyrptocurrency here (end of March, 2018).  It is interesting to think about traditional Government and how it responds to something new like blockchain and its currently most well known child, cryptocurrency.  The key takeaways are the following points they make which for the first time make clear the regulatory environment that they are wanting people to be operating within (these are direct quotes from their Q&A statement):

  • cryptocurrency is property, not currency.
  • Cryptocurrency received as payment for goods or services is business income, which is taxable.
  • This is seen as a barter transaction and you’ll need to calculate the value of the cryptocurrency in New Zealand Dollars (NZD) at the time it’s received.
  • For some ‘alt coins’ (cryptocurrency other than Bitcoin) it may be necessary to convert into US dollars, or any other fiat currency, and then convert into NZD.
  • Rates can vary significantly between different exchanges and currencies. You must use a consistent exchange and conversion approach.
  • Where you acquire cryptocurrency for the purpose of disposal (selling or exchanging it) the proceeds you make from selling it are taxable.
  • For income tax purposes, cryptocurrencies also have similar characteristics to gold bullion.

The IRD had issued some previous guidance before but some of the points here had not been clear.  This guidance indicates that in New Zealand they want to be capturing the value created from the ownership of any cryptocurrency.  Doing that may involve some hurdles to calculate what those values actually will be in New Zealand dollars to report on (eg on a sale calculate Alt coin value -> USD value -> NZD value -> pay tax on that).

The other interesting aspect is if you are receiving payment for goods and services that is to be treated as taxable business income.  What are the flow on impacts of such a regulatory environment in terms of impact on small players who are planning to use a cryptocurrency for small scale projects and as a way to transfer value for someone providing a service, or someone selling some goods.  On an initial reflection about this it means, for example, if I grow organic vegetables in my back garden and receive cryptocurrency in exchange for them from a third party that when I sell them like that then that cryptocurrency is business income that I need to pay tax on.  It adds a layer of complexity perhaps once a regulatory body like the IRD gets involved in what could have been a seamless exchange of cryptocurrency for the exchange of goods or services.  It will be important to keep an eye out and watch how this all develops.

https://www.parryfield.com/wp-content/uploads/2018/04/Coins-300x225.jpg 225 300 support@happymonday.co.nz https://www.parryfield.com/wp-content/uploads/2019/07/Parry-Field-Lawyers-Logo.png support@happymonday.co.nz2018-04-09 05:00:372020-05-27 19:47:32Cryptocurrency Guidance from IRD

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