There are many reasons that people invest in cryptocurrency, with one of the main attractions for investors being its decentralised nature. This means that control and decision-making does not belong to a centralised authority such as a bank or government, and is instead transferred to the users on a distributed network. Others are attracted by the ability to use crypto to hedge against inflation, as some tokens have supply caps, which prevents a centralised authority from generating more of it at their discretion.

As accountants and business advisers, our biggest concern for clients who hold cryptocurrency is that they need to be aware of the associated tax impacts, the importance of record-keeping from the beginning of purchase and making sure that clients are aware of any changes in legislation.

Tax calculation

We can assist with the preparation of tax calculations and tax returns for all cryptocurrency holders whether they be long-term investors, regular traders, or holding in separate entities such as companies or trusts. Our services extend to ensure all compliance requirements are met and we provide regular tax support such as provisional tax management and managing tax deadlines.

Assistance with tax software and record-keeping

Record-keeping is an important component of investing in cryptocurrency, not only because Inland Revenue (the IRD) mandates a seven-year period of record-keeping, but also to ensure that investors stay on top of transaction activity and wallet balances. For the purpose of preparing a tax return, it is vital that investors keep track of all their trading activity and continuously monitor the tax implications of their activity. We can support investors by assisting in record-keeping through tax software such as Koinly and Taxoshi. Our services include guidance with reconciliations, periodic reviews, troubleshooting with complex transactions, and interactive trainings for those seeking to take control of their record-keeping.

Tax treatments of PAYE, paying employees with crypto, holding crypto

Cryptocurrency is increasingly becoming a medium of exchange in everyday business functions such as payroll and point-of-sale. Businesses and their stakeholders need to be aware of how their activity is subject to indirect taxes such as PAYE and GST. We can assist by providing tax advice to those who have already or are seeking to incorporate cryptocurrency into their businesses.

Tax and cash flow planning

Trading and transacting with cryptocurrency give rise to a plethora of considerations around tax and cash flow planning. For those looking to make significant transactions, we can assist by reviewing tax implications of proposed transactions and provide forward-looking analysis to illustrate the impacts on potential tax payments and cash flows. We can also assist taxpayers to manage their future tax liabilities by establishing tax-pooling solutions and advising on upcoming tax payments.

Financial statement preparation and accounting treatments

Entities that hold and trade crypto are still subject to financial reporting requirements determined by the nature and size of their business. For example, those that are large or publicly accountable may be required to prepare IFRS compliant reports, requiring a greater focus on the accounting standards applicable to cryptocurrencies. We can assist in the preparation of any required reports and review specific accounting treatments under relevant reporting standards. We can also support entities seeking advice on complex cryptocurrency transactions and arrangements.