Tax residency and crypto obligations
Investors or speculators in cryptoassets (crypto) who have lived in New Zealand for most of their lives generally do not need to worry about tax residency – if this is you, please move on to the next section. You are likely a New Zealand resident for tax purposes.
However, for those of you who have immigrated or spent time living overseas, it is important to understand where you sit on the tax residency spectrum. Tax residency status is distinct from immigration status.
Inland Revenue’s (IRD) technical decision in 2024 clarified qualifications of taxpayers as transitional residents. It also explored whether amounts derived by a taxpayer from overseas sales of cryptoassets through decentralised exchanges (DEXs) have a New Zealand source. This informs the IRD’s position on residency and taxation of crypto.
Resident tax obligations for cryptoassets
You become a New Zealand tax resident when you have either:
- been in New Zealand for more than 183 days total in any 12-month period; or
- a permanent place of abode in New Zealand.
Tax residents are taxed on their worldwide income. This includes income generated from crypto transactions overseas, even when that crypto has been acquired and disposed through a crypto exchange based outside of New Zealand.
Double taxing of income is policed by specific rules and the IRD is strict on residency tie-breakers for crypto asset holders with a cross-border presence. Some tax liability in New Zealand can be offset by tax you have paid overseas.
New and returning residents: crypto tax impacts
Transitional tax rules may apply to you if you are either:
- new to New Zealand; or
- a returning tax resident who has been away from New Zealand for about ten years.
These rules run for four years and apply to most types of foreign income. Income generated from dealings via crypto transactions outside of New Zealand is not subject to tax in New Zealand during this period. The IRD recognises that foreign-sourced staking and airdrop income may fall outside New Zealand taxable income if derived during the exemption.
However, some crypto income is still taxable in New Zealand during the exemption period:
- New Zealand-sourced income, such as income from buying and selling crypto on a New Zealand crypto exchange.
- Foreign-sourced employment income, such as an employee paid in crypto for services performed overseas.
- Foreign-sourced income relating to services such as a contractor paid in crypto for services provided overseas.
Only here for a short time: when does tax apply?
If you are not a New Zealand tax resident and your income related to crypto dealings is established entirely by offshore activities, then count your lucky stars – all 183 days’ worth. That income is unlikely to be subject to New Zealand tax, provided you remain outside the 183-day residency threshold.
- Read more about tax issues for crypto business transactions
- Learn more about navigating the ecosystem of digital technology and commerce ecosystem by clicking here or contacting Partner James Cochrane.
Disclaimer
The information provided above is for general information purposes only. It does not, nor is it intended to, constitute legal, financial, accounting, tax or other professional advice, and should not be relied upon as such. This information is subject to change without notice. All liability is disclaimed.
