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New Zealand centered on creating crypto-friendly tax laws

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Over the course of the past few months, a number of tax agencies around the globe, have been in the process of creating new guidance frameworks for overseeing their respective crypto industries. Despite being decentralized, cryptocurrency users continue to be subject to varying taxation regulations based on their location. The heavy taxes levied on these digital assets often scare away investors.

Back in December, Brazil’s tax agency, the Department of Federal Revenue (RFB), cracked down on taxpayers who fail to declare crypto transactions when filing their taxes, with a new crypto tax code. The tax code applied to individuals, companies, and brokerages, and includes any crypto-related activities like buying and selling, donations, barters, deposits, withdrawals, and others. Furthermore, Taxpayers were subject to penalties ranging from 500 Brazil reals (BRD) to 1500 BRD, or from $120 to $360 on failure to pay tax.

New Zealand’s crypto-friendly tax policy

Unfair taxation like these is bad for the crypto economy in any jurisdiction. In efforts to tackle this problem and foster growth of the crypto industry, New Zealand’s tax authority has issued a fresh proposal regarding the position of cryptocurrencies in the Goods and Services Tax (GST)-related policy.

According to a paper released by New Zealand’s Inland Revenue Department (IRD) on February 24, the agency has discussed new proposals on the improvement and simplification of tax invoice requirements and exclusion of cryptocurrencies from specific GST provisions. IRD is now seeing feedback on the matter.

It states that cryptocurrencies are innovative digital assets and can have different traits compared to traditional investment classes. This often results in complications within the taxation system, increased compliance costs and multiple policy outcomes. Over-taxation is a natural outcome of such problems.

The paper acknowledged the fast-evolving cryptocurrency market of the nation and believes that these new proposals would be favorable for the underlying economy and would be welcomed by most stakeholders. Furthermore, the policy is designed to ensure that the tax rules do not bar crypto-related developments. A part of the paper reads:

“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 favoring certain types of crypto-assets over others and likely resulting in a distortion in the crypto-asset marketplace.”

The proposed New Zealand crypto tax aims to remove the GST component for cryptocurrencies and keep both GST and income tax treatment for cryptocurrency-related services like exchanges and mining. 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.”

The agency believes that transparent taxation laws will contribute to further boost the growth of the crypto industry in the country as this could ensure that crypto investors and businesses are not at a disadvantage due to dealing with such kinds of assets.

Multiple nations trying to foster crypto growth

While most countries levy taxes on cryptocurrencies in some way, there are some nations where crypto gains are exempted from tax. Germany doesn’t tax capital gains from digital assets that have been held for more than one year, while Singapore doesn’t tax businesses or individuals who hold cryptocurrencies as a long-term investment.

Even though cryptocurrencies aren’t being regulated yet, taxation laws like this could finally throw some light on where cryptocurrencies stand right now in the eyes of the governments. This could very well be one small step towards mass adoption.

Anna Larsen
Anna Larsen has been a Crypto enthusiast since 2016. Fascinated by the technology and its usecases she decided to pursue a career in content creation related to this space. The journey has been exciting ever since.

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