New Zealand’s tax authority has issued new proposals in regard to crypto on the Goods and Services Tax (GST)-related policy and is seeking public feedback on the issue.

On Feb 24, New Zealand’s Inland Revenue Department (IRD) released a paper, which includes proposals on the improvement and simplification of tax invoice requirements and exclusion of cryptocurrencies from specific GST provisions.

To minimize distortion in the crypto market

The document admits that New Zealand has a fast-growing crypto-assets market and expects that most stakeholders will welcome the proposed regulations, or suggest wider tax and regulatory reforms. The country’s tax system ostensibly intends to ensure that the tax rules don’t create barriers for crypto-related developments. The paper reads:

The definitions used for money or financial services as “exempt supplies” (meaning they aren’t subject to GST) didn’t 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.

What about Income Tax?

Specifically, the regulator proposes to exempt cryptocurrencies from both the GST rules and the financial arrangements rules, while cryptocurrency-related services – such as exchange services and mining – will continue to be subject to the existing GST and income tax rules. At the same time, users of certain crypto assets will have to pay income tax on unrealized gains and losses.

GST will still be applied to supplies of goods and services purchased with cryptocurrencies. The paper reads:

The proposed GST changes would only apply to supplies of cryptocurrency-assets. Other services realted to cryptocurrency-assets, that aren’t in themselves supplies of cryptocurrency-assets such as mining, providing cryptocurrency-asset exchange services or providing advice, general business services or computer services will continue to be subject to the existing GST rules.

The agency suggests that simple and clear tax rules will contribute to further the growth of the crypto sector in the country as they could ensure that crypto investors and businesses aren’t at a disadvantage due to dealing with such kinds of assets. As such, the agency asks the public to provide feedback on the proposals set forth in the paper and comment on the potential approaches to the treatment of cryptocurrency.

Government’s Concerns

While New Zealand is trying to establish itself as a cryptocurrency-friendly country, IRD Commissioner Naomi Ferguson has made it clear that the New Zealand government doesn’t consider crypto to be a currency: