By Gareth Vaughan
People should treat alternative currencies such as bitcoin in the same way they'd treat overseas currencies from a tax perspective, the Inland Revenue Department (IRD) says.
"Generally, if someone sells goods or services in exchange for bitcoin, then the market value of the goods or services received in exchange is liable for tax. People should treat an alternative 'currency' dollar, such as bitcoin as they would a foreign dollar from a tax perspective, as transactions are assessable and deductible for income tax purposes to the same extent as other cash or credit transactions," an IRD spokeswoman told interest.co.nz
She said IRD recognises there are new payment methods outside traditional banking systems including the use of bitcoin.
"While we recognise the existence of payment methods such as bitcoin, there is also a compliance risk in that they could be used to conceal sales transactions or funds," the spokeswoman said.
"We continue to monitor standard and alternative payment methods as part of our compliance programme and alongside our government and international colleagues including criminal activity," she added. "Inland Revenue is concerned about any scenario or payment method where people do not pay the correct amount of tax on their transactions or suppress income."
"We will monitor any use of bitcoin, along with all other forms of payment including cash and EFTPOS, but we have not identified bitcoin as a major compliance risk for the time being," the spokeswoman said.
IRD's comments about the tax treatment of virtual currencies such as bitcoin come after the US Inland Revenue Service (IRS) earlier this year issued a notice featuring a series of questions and answers about virtual currencies. The IRS comments in this included; "For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency."
Meanwhile, the Australian Tax Office (ATO) says it's aiming to provide a final guidance paper on the Australian tax treatment of bitcoin and other crypto currencies in time for people to complete 2013–14 income tax returns.
"The key information that a taxpayer will need about each transaction or event with bitcoin is the date, the amount in $A, what it was for, and who the other party was, - their bitcoin address, at a minimum," the ATO says.
7 Comments
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"we have not identified bitcoin as a major compliance risk for the time being". Ok, how will the IRD track unaccounted bitcoin transactions....it wont be able to.
This will become a more sofisticated form of the "cash job", but with international ramifications. Imagine exporters transacting 50% declared, 50% bitcoin, which is then converted to cash in a tax haven bank acount. Easily allow them to declare no profit in good NZ.
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