New Zealand’s tax authorities announced that more than 200,000 citizens did not declare their crypto currency on their tax returns. The watchdog issued a reminder that physical assets are subject to tax and revealed that it will take strict action to track down those who do not disclose their earnings on digital assets.
IRD Issues Letter to Crypto Taxpayers
The Inland Revenue Department (IRD) has announced that it is taking action against taxpayers who have not said anything about their crypto currency. The tax authority will focus on those who are actively dealing with cryptocurrencies but have not disclosed their income in their tax returns.
In 2020, New Zealand updated its digital asset management guidelines. Since then, cryptocurrencies have been treated as an asset for tax purposes, meaning that what citizens do by trading these assets is taxable, as the IRD emphasized.
The revised rules state that digital assets and the income derived from their mining are taxed under certain circumstances.
IRD's updated rules for treatment of digital assets. Source: EY Tax News
The Tax Authority has identified more than 227,000 unique crypto users in the country with more than 7 million transactions. The transaction is estimated to have a total value of NZD 7.8 billion, which is worth approximately $4.77 billion.
According to the report, the information obtained has helped the tax authorities to identify customers who do not pay taxes correctly. Additionally, it assisted the IRD in identifying users with valuable assets.
Trevor Jeffries, a spokesman for the IRD, considers that investors should declare and have the means to pay taxes on their profits as the market has matured this year:
Cryptoasset values have reached new highs, so now is a good time for people to think seriously about taxation for their cryptoasset activity. The higher rate also means that customers are in a better position to pay their taxes for the 2024 tax year and earlier.
New Zealand to Increase Compliance Activities
Jeffries said investors should think about their tax obligations and consider the risks associated with not declaring all tax-related transactions. He also emphasized that the authority has provided comprehensive guidance on crypto taxes.
Last year, the tax department notified a team of high-risk clients and allowed them to address any non-compliance issues before facing an audit. Similarly, the IRD has revealed that it has sent a new round of letters to crypto investors who have not declared their money correctly.
Jeffries revealed that the tax department is “increasing” its compliance duties for taxpayers with digital assets and reminded users that the IRD can identify them.
We want clients and tax agents to know that we are adding our compliance services to clients with cryptoassets. Despite popular thinking – people are invisible on the Blockchain, and we have the tools and analytical capabilities to identify and reveal cryptoasset activity.
The IRD has indicated that it is cooperating with internal and overseas interviews to gather relevant information. The department is also working with other tax jurisdictions to obtain more data on customers’ crypto assets and transactions outside of New Zealand.
It is worth noting that the country’s crypto laws are not very developed. Last year, the Reserve Bank of New Zealand (RBNZ) announced that a regulatory approach “is not needed at this time, but more vigilance is needed.”
However, the Minister of Trade and Consumerism, Andrew Bayly, considers that the government should be involved in regulating this sector.
In April, Bayly responded to a parliamentary committee inquiry, suggesting that New Zealand is taking a “proactive and innovative approach to digital assets and blockchain.” For the Minister, the government should support the growth of the industry and consider the recommendations made by the Inquiry.
Bitcoin (BTC) is trading at $57,486 in the weekly chart. Source: BTCUSDT on TradingView
Featured image from Unsplash.com, Chart from TradingView.com
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