New Zealand’s Inland Revenue issued a ruling TDS 24/22 addressing the transitional residency status of a taxpayer and the tax treatment of their crypto asset sales on 3 December 2024.

The Taxpayer was a natural person who had previously been a New Zealand resident, (but not a transitional resident), had moved offshore for more than 10 years and was now looking to return to New Zealand.

The Taxpayer intended to purchase a property in New Zealand to be their permanent place of abode (PPOA) or would otherwise remain in New Zealand for a period greater than 183 days while looking for such a property.

The Taxpayer held crypto assets in overseas centralised exchanges as well as decentralised exchanges (DEX). These assets were not intended to be a trading or business activity, being held long term, but may have been sold from time to time to rationalise the overall portfolio.

The Taxpayer had sought a ruling that they would be a transitional resident and that the sales of crypto assets would be exempt income under these rules.

The Tax Counsel Office (TCO) were not asked to rule on whether the sales of the crypto assets were income of the Taxpayer

The ruling addressed two key questions: whether the taxpayer would qualify as a transitional resident and whether the income derived from the sale of crypto assets through overseas centralized exchanges or decentralised exchanges (DEXs) could be considered to have a source in New Zealand.

The main issues considered in this ruling were:  Whether the Taxpayer would qualify to be a transitional resident,  whether the amounts derived by the Taxpayer from the sale of crypto assets through overseas centralised exchanges or DEXs have a source in New Zealand.

TCO concluded that the taxpayer would qualify to be a transitional resident (on the presumption certain conditions were met);  the amounts derived from the sale of crypto assets did not have a source in New Zealand.