On 26 August 2024, New Zealand’s Minister of Revenue, Simon Watts, announced, foot A new bill has been introduced to the House of Representatives that could have major implications for the island nation’s cryptocurrency system.
The OECD Cryptocurrency Reporting Framework will be implemented
The new bill, titled Taxation (Annual Rates for 2024-2025, Emergency Response, and Remedial Measures), aims to give legislative effect to the Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard (CARF) developed by the Organisation for Economic Co-operation and Development (OECD).
The proposed amendments are set to come into effect on April 1, 2026, and will require New Zealand-based crypto asset service providers (RCASPs), such as exchanges, to comply with the new regulatory requirements. These entities will have until July 30, 2027, to report all relevant user information to New Zealand’s tax authority, the Inland Revenue Service (IR).
Specifically, exchanges will be required to report their users’ personal information, such as name, address, date of birth, and tax identification number. Additionally, they will be required to report aggregate user data on all relevant digital asset transactions, crypto-to-fiat transactions, and digital asset-to-wallet transfers to ensure that profits are taxed accurately.
The International Tax Office will then share this information with all relevant tax authorities worldwide in cases where the information applies to users in other jurisdictions by September 30, 2027.
The bill notes that there is currently insufficient oversight of digital asset transactions and income derived from profits made through digital asset trading. It adds:
Internationally, there has been growing momentum to ensure that tax authorities retain the ability to see income-earning or investment opportunities facilitated for individuals through large-scale intermediaries.
Consequences of failure to comply with reporting requirements
The bill proposes new penalties for crypto asset service providers who fail to comply with their obligations to report crypto asset transactions. In each instance of non-compliance, they will be fined NZ$300 ($187), up to a maximum of NZ$10,000 ($6,231) per year.
It is worth noting that online transaction reporting service providers will not be liable for fines if circumstances are beyond their control. Additionally, users of trading platforms who do not comply with reporting rules may be fined up to NZ$1,000 (US$621).
The strict rules for reporting digital assets highlighted by the bill are not at all surprising. In July 2024, New Zealand’s tax authorities decided Stated More than 200,000 people failed to declare their cryptocurrency income on their tax returns.
It is worth noting that in 2020, the New Zealand Tax Authority revised its guidelines to include cryptocurrencies within the taxable asset category, essentially treating digital assets as a form of property for tax purposes.
Against this backdrop, the new bill has the potential to completely transform New Zealand’s current crypto ecosystem. If the bill passes, the New Zealand Tax Agency will be able to access users’ transactions on registered exchanges and calculate how much tax they owe on their profits, if any.
While some countries are ramping up cryptocurrency regulations to improve tax compliance, others are delaying such measures due to a lack of clarity regarding the new asset class.
For example, earlier this month, South Korean lawmakers passed a bill Proposed The country’s cryptocurrency tax implementation has been postponed due to investor concerns.
In Japan, the Japan Blockchain Association opinion Reducing the strict taxes imposed on cryptocurrencies to encourage broader participation in the burgeoning digital asset space is interesting. It will be interesting to observe the long-term effects of strict and lax cryptocurrency regulations on the digital asset ecosystem in any country.
Featured image from Unsplash, chart from TradingView
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