New Zealand Proposes New Taxes to Promote Cryptocurrencies

Overview-

• New Zealand proposes new tax laws to promote the growth of cryptocurrencies.
• The new GST tax rules are not applied to the cryptocurrencies but the taxes will still be applied to the goods and services purchased.

The tax department of New Zealand has proposed new tax rules on Goods and Services Tax(GST) for cryptocurrencies to promote its growth.

The Inland Revenue Department (IRD) of New Zealand has released a paper that has included the new tax rules and proposals on simplification and improvement of tax requirements. The document has proposed the new laws amidst the increasing growth of cryptocurrency usage and adoption. The country’s tax rules mainly aim to promote and develop the cryptocurrencies and its usage.

The paper further says, “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” 

However, while the taxes exempt cryptocurrencies from the GST rules but the cryptocurrency-related services such as the exchange services and mining will exist under GST and the income tax rules and GST will still be applied to the goods and services purchased cryptocurrencies and the paper further 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.”

New Zealand is working towards making itself a cryptocurrency-friendly country but the commissioner of IRD, Naomi Ferguson still does not consider the cryptocurrency to be a currency and has said, “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”