One big question mark for the Inland Revenue Department is how to tax crypto assets. The IRD decided to treat it as property and tax it accordingly to make things simpler. This ruling makes crypto taxes in New Zealand easy to understand. There is still some ambiguity about certain aspects of the rules. Read this article till the end to know more about how crypto will be taxed in NZ.
New Zealand has clear tax rules when it comes to individual income. The tax rates are 10.5% and go up to 39%, depending on different income levels. If you are a resident, your income in the country and outside is all accounted for taxation purposes. If you are a non-resident, only your income earned in New Zealand is taxable.
Application
Individuals and businesses use crypto for investment, trading, and transaction purposes. It can be a long-term investment, mining, trading crypto assets, staking, lending crypto assets, or using them as payments. All these activities in the crypto sphere come under the tax purview according to NZ’s IRD. Their recent ruling stated that crypto will be treated as property and taxed based on those rules.
When Will It Be Taxed?
Since NZ does not have an elaborate capital gains tax regime, crypto assets will be taxed when bought solely for resale (trading), used in a planned manner to make a profit, and spend significant time and effort to deal or trade in the assets.
Mining As A Hobby Or For Intentional Trade Purposes
Another aspect of crypto taxation is that the new regulations state that crypto is taxable at mining to the service provider and at the time of sale to the holder. If mining is done as a hobby rather than a regular transactional activity, it is exempt from taxation. The rules do not clarify how the intention will be classified as hobby or transactional at the time of mining.
Tax On Staking
Staking is more like shareholding rather than pure property holding. In such cases, the primary source of income is through transaction processing activities and the right to the asset’s future value. These are synonymous with dividends and capital gains due to the increase in the price of stocks. Therefore, the income on staking is taxed in two ways. The dividends are taxed on receipt, and capital gains are taxed on the asset’s sale.
Crypto For Business Us
Many businesses have accepted crypto payments, and these assets are then sold to generate revenue. Thus, the income from the sale of crypto is treated as business income and taxed accordingly.
Crypto is a unique asset class with the features of multiple assets rolled into one. The IRD has tried to compare it to similar assets such as gold and property, but these do not cover the entire gamut of crypto transactions.
Therefore, there is a degree of uncertainty surrounding its taxation. The IRD is constantly trying to restructure its crypto taxation laws and is taking cues from the U.S and Australia to make crypto taxes in New Zealand transparent and straightforward.
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