I recently had a phone call with Inland Revenue (IR) discussing common cryptocurrency tax situations we are experiencing.
The purpose of the phone call was to discuss these common situations, how we are preparing cryptocurrency financial statements and calculating taxable income. We also discussed the difficulties that cryptocurrency (and digital international assets) brings and how IR guidelines could be improved for these situations.
We are expecting IR to release updated cryptocurrency guidelines shortly.
Some of the key issues we discussed with IR were the tax implications of:
- Cryptocurrency and GST (updated published: 28/11/2019)
- The tax implications of changing from a crypto trading business to a speculative crypto investor
- What classifies someone as a cryptocurrency trader compared to a speculative investor and why this distinction is important for tax purposes
- How we are calculating the value of closing cryptocurrency (inventory) with a significant volume of micro transactions
- Leaving NZ with cryptocurrency and exiting the NZ tax net
- Arriving into NZ with cryptocurrency and entering the NZ tax net. Should a deduction be allowed for original cost value, market value on the day of arriving?
- Transitional temporary foreign tax exemption for migrates arriving into NZ with cryptocurrency and the value entering the NZ tax net.
- What will happen when there are more actual use cases for cryptocurrency (i.e., it does become another form of accepted payment); will cryptocurrency still be classified as property for tax purposes.
- Different tokens with different characteristics and different tax positions.
We’ll be covering these topics over the next few months. In the meantime, if any of these situations apply to you, please get in touch with us. There may be some actions you could take now that have a significant effect on your overall strategy, profitability and subsequent tax to pay.
We are Chartered Accountants who prepare financial statements and income tax returns that involve cryptocurrency. We also provide personalised tax advice to your individual circumstances.
Contact Tim Doyle on 07 823 4980 or email Tim to arrange a no obligation call or meeting to discuss any crypto tax or accounting questions. Our office is in Cambridge, NZ, but distance is no problem. We have many international and national clients.
This is only our interpretation and has been prepared for informational purposes only and is not intended to provide, and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.