Bitrabo Editorial
New Zealand’s tax authorities disclosed that more than 200,000 individuals had failed to report their cryptocurrency income on their tax filings. The regulatory body emphasized that virtual assets are subject to taxation and vowed to employ stronger tactics to trace those avoiding the declaration of their digital asset earnings.
IRD Sends Correspondence to Crypto Taxpayers
The Inland Revenue Department (IRD) specified that it is concentrating on individuals who have not declared their cryptocurrency earnings. The tax agency will target those actively involved in cryptocurrency transactions but have not divulged their income on tax returns.
In 2020, New Zealand updated its guidelines regarding the treatment of digital assets. Since then, cryptocurrencies have been classified as property for tax purposes, making profits from trading these assets taxable, as outlined by the IRD.
The revised regulations stipulate that digital assets and income from their mining are subject to taxation under specific conditions.
The tax authority has identified over 227,000 unique cryptocurrency users in the country with over 7 million transactions, totaling NZD 7.8 billion (approximately $4.77 billion).
According to reports, the information received has allowed the tax authority to uncover individuals who have not fulfilled their tax obligations. Additionally, it has aided the IRD in identifying users with substantial holdings.
Trevor Jeffries, an IRD representative, stressed the importance for investors to disclose their profits and be prepared to meet tax obligations, given the market’s growth:
“Cryptocurrency values have soared, prompting people to seriously consider the tax implications. The increased value means individuals are well-equipped to meet their tax liabilities for the current and preceding years.”
New Zealand Intensifies Compliance Efforts
Jeffries urged investors to acknowledge their tax responsibilities and comprehend the risks associated with non-disclosure of taxable activities. He also emphasized the availability of comprehensive guidance on cryptocurrency taxes.
Last year, the tax department reached out to a group of high-risk customers to rectify any non-compliance issues before undergoing an audit. Similarly, the IRD disclosed that it has dispatched new notices to cryptocurrency investors who have not accurately reported their income.
Jeffries indicated that the tax department is escalating its compliance actions for taxpayers holding digital assets and reiterated that the IRD has the means to identify such individuals.
“We want customers and tax agents to understand that we are heightening our compliance efforts for customers involved in digital assets. Despite common belief, individuals are traceable on the blockchain, and we possess the tools and analytics to identify and expose cryptocurrency activities.”
The IRD mentioned that it collaborates with domestic and international exchanges to gather relevant data. Additionally, the department is working with other tax jurisdictions to obtain more information about customers’ crypto assets and transactions outside New Zealand.
It is essential to note that the regulatory framework for cryptocurrencies in the country is still underdeveloped. The Reserve Bank of New Zealand (RBNZ) stated last year that a regulatory approach is not presently required but emphasized the need for heightened vigilance.
However, Minister of Commerce and Consumer Affairs Andrew Bayly advocates for a more proactive regulatory stance towards the industry.
In April, Bayly responded to an inquiry suggesting that New Zealand adopt a more dynamic and innovation-friendly approach to digital assets and blockchain technology. The Minister believes that the government should foster industry growth and consider the recommendations outlined in the inquiry.