New Zealand's tax authorities have ruled that income in cryptocurrencies is legal and provided guidance on how exactly it should be taxed.
In a tax information bulletin published on July 4, the New Zealand Inland Revenue Department summarized the provisions of the public ruling, made under s 91D of the country's Tax Administration Act 1994.
Crypto used must be “money-like” to be taxed
Specifically, the guidance on the income tax treatment of crypto assets applies to payments in crypto that form part of the employees’ regular salary and are fixed at a predetermined amount or rate — rather than, for example, payments that form part of an employee share scheme.
Moreover, it applies only to salary and wage earners — not to self-employed taxpayers — covering both remuneration for services and bonuses, commissions and gratuities.
For a crypto asset-denominated salary to be taxable, the ruling determines that the crypto asset paid to employees must not be subject to a lock-up period and must be directly convertible into fiat currency, clarifying that:
“In the current environment where crypto-assets are not readily accepted as payment for goods and services, the Commissioner’s view is that crypto-assets that cannot be converted directly into fiat currency on an exchange […] are not sufficiently “money-like” to be considered salary or wages.”
“Money-like” crypto assets are further defined as those that provide a general peer-to-peer payment system, rather than assets that function in a similar way to vouchers, shares, or debt securities.
Thus for the wage to be taxable, the agency deems that a significant purpose of the crypto asset in question must be that it functions as a currency, or is otherwise to be pegged to one (or more) fiat currencies.
Tightening the noose
As reported, tax authorities and lawmakers globally are increasingly turning their attention to cryptocurrencies — both clarifying which provisions they fall under and attempting to tighten their grip on evasion.
Last week, crypto industry sources claimed that the United Kingdom’s tax authority was allegedly requesting that digital currency exchanges provide it with information about customers’ names and transactions aiming to identify cases of tax evasion.