But that is about to change. New Zealand will soon have a comprehensive system through which it can monitor and report crypto transactions by its residents and assist other jurisdictions in monitoring theirs.

In April next year, it will implement the Organisation for Economic Co-operation and Development’s (OECD) Crypto-Asset Reporting Framework (CARF), joining the global push to enhance transparency in the cryptocurrency market and tackle tax evasion.

Purpose of the CARF framework

By adopting CARF, New Zealand aligns with international information exchange framework, whereby Inland Revenue will:

• Receive information from foreign CARF-adhering tax authorities on the activities of New Zealand resident cryptoasset users;
• Receive information from Reporting Crypto-Asset Service Providers (RCASPs) regarding their users who are resident in New Zealand; and
• Provide information collected from RCASPs to foreign CARF-adhering tax authorities regarding reportable users who reside in those jurisdictions.

The framework addresses tax compliance challenges for tracking crypto income, such as the fact that cryptoassets can be stored and transferred in a decentralised manner without using traditional intermediaries. As the crypto market has grown, it’s become increasingly difficult to ensure that revenue from digital assets is taxed properly.

Inland Revenue will use the new information to ensure that Kiwis pay the required tax on crypto-related income. Likewise, overseas revenue authorities will be using information provided to them to ensure local tax compliance.

At this point, more than 50 jurisdictions have publicly committed to implementing CARF.

Requirements for crypto service providers

The CARF mandates that RCASPs collect detailed information on their users’ transactions. This includes data about the users and their crypto trades. RCASPs must report this information to Inland Revenue by 30 June 2027, with annual reporting thereafter. When that information relates to overseas based residents, it will be shared with the relevant foreign tax authority.

As defined by the OECD, an RCASP is “any individual or entity that, as a business, facilitates provides a service effectuating exchange transactions for or on behalf of customers, including by acting as a counterplay or as an intermediary, to such exchange transactions, or by making available a trading platform”.

Under the CARF, RCASPs must:

• Collect user identification data (such as name, address, DOB and tax identification number);
• Record details of crypto transactions; and
• Submit annual reports to Inland Revenue.

These requirements will apply to crypto exchanges, wallet providers and other entities facilitating crypto transactions in New Zealand.

Penalties for non-compliance

RCASPs failing to meet reporting obligations face fines of $300 per instance. Additionally, crypto users who refuse to provide required information about themselves or related persons could be fined $1,000.

Key message

The adoption of the CARF marks a pivotal shift in New Zealand’s approach to cryptocurrency regulation and reflects the unique challenges posed by digital assets.

If you have outstanding crypto income tax obligations it would be prudent to contact your local Baker Tilly Staples Rodway tax or cryptocurrency specialist for professional tax advice before being approached with a “please explain” from Inland Revenue.