Tax authorities in New Zealand are proposing certain crypto tax exemptions in a bid to aid the development of the emerging industry.
If passed into law, New Zealand will become the latest to allow some form of crypto tax exemptions even as other jurisdictions move towards stricter cryptocurrency tax compliance.
Neighbors Australia are among the countries with some of the strictest virtual currency taxation laws. The United States Internal Revenue Service (IRS) is also reportedly putting cryptos and the gig economy as the focus of its compliance drive for the 2020 tax season.
Crypto Tax Holiday May Stimulate Industry Growth
New Zealand’s Inland Revenue Department (IRD) has included crypto tax provisions in a policy document for taxation in the country. As part of the paper, the country’s tax agency is considering the possibility of excluding cryptocurrencies from Goods and Services Tax (GST) provisions.
An excerpt from the policy document detailing the proposed application of GST tax laws to cryptos reads:
“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.”
Apart from the GST exemption, the IRD also plans to remove financial arrangement tax obligations from the supply of products and services purchased via cryptos. Again, this exemption will not extend to other cryptocurrency-related services.
For the IRD, the proposed exemptions aim to eliminate any disadvantage that investors and other stakeholders may have in selling crypto tokens in the country. According to the report, New Zealand authorities want to present the country as a conducive environment for virtual currency commerce.
New Zealand’s tax body also sees the proposal as a way of bridging the gap between the compliance requirements for cryptos and similar investment products. However, the IRD recognizes that cryptos being a broad asset class may require more nuanced considerations in applying these exemptions.
The proposed crypto tax exemption also indicates a further example of the IRD’s acknowledgment of the crypto industry. Back in August 2019, the IRD ruled that it was legal to pay employee salaries in cryptocurrencies. New Zealand’s tax body also allowed employers to pay bonuses which can then be exchanged for or pegged to a fiat currency.
Global Cryptocurrency Taxation Roundup
As previously reported by Blockonomi, tax authorities around the globe are paying greater attention to crypto tax compliance. In the United States, the IRS is reportedly set to crack down on crypto tax evasion, even introducing a cryptocurrency-related question in Form 1040.
Back in 2019, the IRS sent warning letters to crypto owners to accurately report their cryptocurrency transactions. Meanwhile, lawmakers in the country are working towards introducing a ‘de minimis’ crypto tax exemptions for small virtual currency transactions.
Like the U.S., the UK’s tax body is also working towards combating crypto tax evaders. Earlier in the year, Her Majesty’s Revenue and Customs (HMRC) announced plans to acquire technology in tracking cryptocurrency transactions
In Iran, the government has offered tax holidays to Bitcoin miners who repatriate their foreign earnings to the country. The move brought an end to a stalemate between miners and government officials with the former previously establishing an operational presence in mosques across the country.
Authorities in Tehran also stipulated a new pricing regime for electricity tariff for crypto miners in Iran.
South Korean bitcoin trading giant Bithumb got slapped with a $69 million crypto tax fine by the country’s National Tax Service (NTS). However, the crypto exchange service says it will fight the penalty.