Clearing out its stand on Bitcoin and the taxes it is liable for, the Inland Revenue Department (IRD) says that 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. The crux of the opinion is that the IRD should treat Bitcoin as treats overseas currencies from a tax perspective.
The agency says that people should treat an alternative ‘currency’ dollar, such as Bitcoin as they would a foreign dollar from a tax perspective. It further clarifies that as transactions are assessable and deductible for income tax purposes to the same extent as other cash or credit transactions, this understanding will help a lot.
An IRD spokeswoman says that the organization recognizes there are new payment methods outside traditional banking systems including the use of Bitcoin. Being a national body that collects most of the revenue that government needs to fund its programs is trying to bring Bitcoin in tax ambit and this is quite evident from it.
The announcement says that 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. Bitcoin which has long been claimed that being used to avoid taxes can now be brought into tax regime in New Zealand.
According to the organization as it is part of the duty for it to undertake research from time-to-time it came across with Bitcoin as well. The organization says that it also publish tax related statistics each year which are intended to improve transparency and meet the information needs of external users and government departments.
Bitcoin is new payment methods outside traditional banking systems
The government agency believes that while it recognizes 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. Thus, to rule out any such instances it continues to monitor standard and alternative payment methods as part of our compliance program.
Like Inland Revenue Service or IRS from the US, IRD’s comments too are based on its experience and exposure it has vis-à-vis Bitcoin. Earlier this year the IRS had admitted that for federal tax purposes, virtual currency is treated as property. Also, general tax principles applicable to property transactions apply to transactions using virtual currency.”
To contact the reporter of this story: Deepak Tiwari at firstname.lastname@example.org