Cryptocurrency Regulations in New Zealand

The primary state regulators of the cryptocurrency market are the Reserve Bank of New Zealand and the Financial Markets Authority (FMA). The Inland Revenue Department (IRD), known for its strict stance on tax evasion, particularly regarding crypto earnings, monitors taxpayer compliance.

In July 2024, an IRD spokesperson, Trevor Jeffries, disclosed the identification of 227,000 people who engaged with cryptocurrencies last year, with transactions amounting to $7.8 billion.

We want to make it clear that we are actively monitoring cryptocurrency transactions to ensure that all users are paying the required taxes

he stated.

Many people believe that blockchain transactions are untraceable, but this is a misconception. We have specialized tools that allow us to see all transactions

New Zealand's Regulatory Framework for the Digital Market  

The Council of Financial Regulators (CoFR) has released an official statement acknowledging crypto assets as a digital representation of value that can be transferred, electronically stored, and utilized to purchase goods and services.   

Although blockchain technology, the foundation of virtual currencies, has advanced significantly and presents new opportunities in finance, the potential benefits of crypto assets for the economy and society at large remain unclear.

New Zealand is among the first nations globally to authorize salary payments in cryptocurrencies. Companies can compensate their employees in BTC, ETH, and other digital currencies under the condition that these payments are fixed, regular, and continue throughout the employment contract. New Zealand employers find this payment method advantageous for international transactions and freelancer payments. For tech companies, it serves as an effective strategy to attract young professionals who are eager to receive their wages in cryptocurrency.

Crypto Taxes in New Zealand  

Cryptocurrencies are treated as property in New Zealand, implying that earnings from them are subject to taxation under general principles. Residents who gain profits from mining, staking, selling, or trading cryptocurrencies (including through airdrops) must report these in their tax returns and pay the applicable taxes.

Taxation is influenced by the intent behind acquiring digital assets. If the primary purpose is resale, the profit is taxable. If the cryptocurrency is intended as a long-term investment, different tax regulations apply, namely a secondary tax rate that is applicable when a New Zealander earns income from multiple sources.

The tax rate on crypto income (including salaries) in New Zealand varies with the total annual income and ranges from 10.5% to 39%. For instance, crypto earnings below NZ$14,000 are taxed at 10.5%, while those over NZ$70,000 attract a 33% rate.

Citizens who suffer losses from their cryptocurrency dealings can deduct these from their other incomes, thereby reducing their overall tax liability.

Note that these rules do not extend to non-residents. Foreigners can actively trade digital assets and owe no taxes to the local treasury. However, IRD officials must annually report to European and US tax authorities the amount of income earned by foreign nationals in New Zealand.