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Income > Taxation of Crypto Currency > Flashcards

Taxation of Crypto Currency Flashcards

1
Q

What is a crypto currency?

A

A digital asset you can buy or exchange or by participating in an ICO and which you can hold in a digital “wallet”.

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2
Q

Crypto currency is a _____________ you can buy or exchange or by participating in an ICO and which you can hold in a digital “wallet”.

A

Digital asset

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3
Q

Crypto currency is a digital asset you can ____________ or exchange or by participating in an ICO and which you can hold in a digital “wallet”.

A

Buy

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4
Q

Crypto currency is a digital asset you can buy or ____________ or by participating in an ICO and which you can hold in a digital “wallet”.

A

Exchange

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5
Q

Crypto currency is a digital asset you can buy or exchange or by participating in an _________ and which you can hold in a digital “wallet”.

A

ICO

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6
Q

Crypto currency is a digital asset you can buy or exchange or by participating in an ICO and which you can hold in a digital _______

A

“wallet”.

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7
Q

What does ICO stand for, for the purposes of crypto currency?

A

An Initial Coin Offer

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8
Q

For the purposes of crypto currency, what is the acronym for Initial Coin Offer?

A

ICO

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9
Q

Other than a “coin” what is a crypto currency often called?

A

A token.

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10
Q

Other than a “token” what is a crypto currency often called?

A

A “coin”.

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11
Q

How are ICOs being used?

A

As a means of raising capital for business or projects.

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12
Q

What is fiat money?

A

Currency that a government has declared to be legal tender, but it is not backed by a physical commodity.

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13
Q

What is the value of fiat money derived from?

A

The relationship between supply and demand rather than the value of the material that the money is made of.

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14
Q

Why are all currencies now considered to be fiat currencies?

A

Because there are no existing currencies backed by commodities.

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15
Q

Most counties maintain supplies of gold. Why does this not mean that their currencies are considered to be backed by commodities?

A

Because the gold is not used to back the value of the currencies.

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16
Q

When ICOs are used as a form or currency, what might the issuer offer units of the ICO in exchange for, other than money (fiat)?

A

Receipt of units of an existing crypto currency.

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17
Q

If under an ICO, the issuer offer units of the ICO in exchange for units of an existing crypto currency, what existing crypto currencies are typically used?

A

Bitcoins or Ethereum

18
Q

What has IR informally advised concerning whether or not crypto currencies are treated as financial arrangements?

A

That in most cases they would not be treated as financial arrangements.

19
Q

Is IR not treating crypto currencies as financial arrangements consistent with the position of the ATO?

A

Yes

20
Q

What is the tax effect of crypto currencies not being treated as financial arrangements?

A

They should not come within the scope of New Zealand’s FIF rules.

21
Q

Would crypto currencies be subject to income tax when they were converted into money (fiat) in NZ?

A

Yes realised gains on sale, exchange or conversion of crypto currency would likely be subject to NZ income tax.

22
Q

Gain on sale, exchange or conversion of crypto currency might be considered taxable in New Zealand because it was acquired for the purpose of disposal or because what?

A

The person deals (is in the business of dealing) in crypto currency.

23
Q

Gain on sale, exchange or conversion of crypto currency might be considered taxable in New Zealand because the person deals (is in the business of dealing) in crypto currency or because what?

A

The crypto currency was acquired for the purpose of disposal.

24
Q

What is the onus on the taxpayer to do if they wish to assert that money gained from gain on sale, exchange or conversion of crypto currency as part of a particular transaction, is not income?

A

To demonstrate that a particular transaction in crypto currency is not taxable.

25
Q

What is IR’s treatment of crypto currency considered to be likely to be consistent with?

A

IR’s treatment of gold bullion.

26
Q

What is IR’s income tax treatment of gains on the sale of gold bullion?

A

That it is taxable in most cases.

27
Q

Other than the rights of the participants in the ICO and the regulatory characterisation of the issuance what else is likely to be considered when considering the tax treatment of ICO proceeds?

A

How the transaction is treated for accounting purposes.

28
Q

Other than the rights of the participants in the ICO and how the transaction is treated for accounting purposes, what else is likely to be considered when considering the tax treatment of ICO proceeds?

A

The regulatory characterisation of the issuance.

29
Q

Other than the regulatory characterisation of the issuance and how the transaction is treated for accounting purposes, what else is likely to be considered when considering the tax treatment of ICO proceeds?

A

The rights of the participants.

30
Q

What are “enterprise rights” granted under an ICO considered to be similar to?

A

Shares in a company.

31
Q

Where an ICO grants “enterprise rights” what are the gain proceeds from an ICO likely to be treated as?

A

As being capital in nature.

32
Q

What are “utility” rights” granted under an ICO?

A

Access to a new product or service.

33
Q

Where an ICO grants “utility rights” what are the gain proceeds from an ICO likely to be treated as?

A

A deferred revenue liability which is released as revenue to the profit and loss account when the token holders utilise the product or service.

34
Q

Crypto currency may be considered not to be money or some other financial service which is otherwise exempt from GST but more akin to what?

A

A voucher or a barter transaction.

35
Q

Are voucher or barter transactions normally subject to GST?

A

Yes

36
Q

What issue might there be with respect to input credits and crypto currencies?

A

Whether you can claim a GST input credit and how you would support this in the absence of a tax invoice.

37
Q

For crypto currency sales, what is a GST issue concerning determining where your counterpart is located?

A

How do you determine whether your counterpart is off share and whether you can zero rate?

38
Q

What issue concerning market value might there be concerning crypto currencies and GST?

A

How you determine the value of a supply in a highly volatile market.

39
Q

What will the NZ government likely do with respect to crypto currency and GST?

A

Enact legislation to exempt crypto currency from GST.

40
Q

How does Australia treat crypto currency for GST purposes?

A

It exempts it.

41
Q

How does the UK treat crypto currency for VAT purposes?

A

It exempts it.

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