New Zealand Tax Authority has proposed new Goods and Services Tax (GST) regulations regarding digital assets. They are now seeking public opinion on the review.
New Zealand Inland Revenue Department of (IRD) made the announcement via a report released on February 24. The report majorly covered modifications to the tax invoice requirements as well as bypassing cryptocurrencies from certain GST requirements.
The document further confirmed that New Zealand is becoming a crypto hub and it is only fitting that favorable regulations are put in place.
For now, the country is looking to attract more cryptocurrency stakeholders and investors. While ensuring that regulations do not become drawbacks to the growth and development of New Zealand’s crypto space.
According to the report, financial services or money are classified under “exempt supplies” in New Zealand law. This means that they are not subject to GST regulations. For now, GST regulations have been shown to favor some types of cryptocurrencies over others. Subsequently resulting in irregularities in the crypto sphere.
The report reads: “GST may be imposed on certain types of crypto-assets, but not others – depending on their particular purpose and design.” Further adding that “GST treatment is unintentionally favoring certain types of crypto-assets over others and likely resulting in a distortion in the crypto-asset marketplace.”
In essence, New Zealand is looking to exclude crypto not only from GST regulatory requirements but from income tax too. However certain digital assets services like mining amongst other crypto exchange services will still obey income tax regulations. And would also still adhere to GST regulations.
GST will still be placed on all goods and services purchased with cryptocurrencies. This recently proposed regulation will allegedly only apply to the supply of digital currencies.
Currently, New Zealand regulations see cryptocurrencies as property, and all crypto transactions are expected to pay 15 percent GST first. Before also paying income tax, thereby resulting in the issue of double taxation on crypto transactions.
New Zealand IRD has referred to the situation as unfavorable hence the need for revamping of current regulations.
The review of current regulations is simply to ensure that crypto enjoys similar treatment as other investment products. Especially those that can be easily substituted for crypto. Providing a simple and clear-cut taxation procedure that will further encourage the growth of the crypto industry.
For now, the agency is asking the public to send in feedback with regards to the proposed regulations.
Crypto, not money – Naomi Ferguson
The crypto space has over time attracted a lot of attention from regulators worldwide. With several of them proposing stringent regulations in a bid to stifle the growth of the digital assets space. New Zealand, on the other hand, is reviewing its regulations to ensure the crypto industry has a favorable regulatory environment. However, Naomi Ferguson, IRD Commissioner, has disclosed that irrespective of reviewing its crypto regulations. The country still does not recognize digital assets as a form of money.
She said in the report that, “crypto-assets are property. Crypto-assets are not ‘money’ as commonly understood (at least not at the present time).” As they are not issued by any government or seen as a legal tender anywhere in the world.