New Zealand has joined a number of territories in confirming this month that virtual currency transactions are taxable as property, in new guidance that was issued at the beginning of the month.
Tony Morris, the Inland Revenue Department representative responsible for virtual currency compliance, said "trading in cryptocurrencies may happen in a digital realm but tax obligations still apply in New Zealand. Inland Revenue has responded to requests for guidance by issuing some common questions and answers on our website so that everyone knows their responsibilities. Just like with property - when you acquire cryptocurrency for the purpose of selling or exchanging it, the proceeds you make from selling it are taxable."
He explained that virtual currencies are subject to existing tax rules. He stated: "...generally the only time they produce an income is when they change hands. Tax is also applied when one cryptocurrency is swapped for another. You don't need to cash out to dollars to create a tax obligation. Likewise, if you receive a cryptocurrency as payment for goods or services, this is considered business income and is taxable."
He added that tax rules for foreign exchange don't apply when it comes to cryptocurrencies.
Concluding, he urged taxpayers to keep records of transactions and let Inland Revenue know if previous tax returns are incorrect. "Operating in the digital world doesn't absolve you from your tax obligations. It also doesn't mean your activity is untraceable," he said.