Tax Implications of Cryptocurrency Held in a New Zealand Company
Thinking about using a company structure for your cryptocurrency investments? Make sure you're informed about the significant tax considerations and explore the benefits, risks, and costs.
You might think moving your cryptocurrency investments into a New Zealand company offers straightforward tax benefits. However, the reality is nuanced, and making the wrong move could lead to unexpected costs or compliance headaches.
Here's what savvy investors must know:
Company Tax Rate: 28%
Profits earned by a company from cryptocurrency are taxed at a flat corporate rate of 28%.
There is a temporary timing benefit: For individuals in the top personal tax bracket (39%), retaining profits within the company initially saves 11% in tax, although future dividends to shareholders will still incur additional tax (more details below).
Example:
John earns $200,000 profit from crypto.
Personally taxed at 39%, he'd owe $78,000.
Holding this in his company, he'd only owe $56,000 initially.
However, extracting these profits later through dividends triggers the additional 11% additional tax.
In the short term, that $22,000 could remain invested in the crypto markets (or other investments) and earn further returns. This is known as the time value of money.
Dividend Distribution and Personal Tax
When profits are eventually distributed as dividends, shareholders must pay additional tax up to their marginal personal rate.
Imputation credits (from tax already paid at 28%) are applied to offset part of this additional tax. There is no double tax. Only the first tax at 28% paid by the company when the profit is earned, and the extra 5 – 11% tax at the time the dividend is paid (generally when cash is extracted or paid to the shareholders).
A long-term dividend and wealth plan is critical. However, the volatility of cryptocurrency can make this difficult.
Example:
Sarah’s company pays her a $100,000 dividend.
The company has paid $28,000 tax (imputation credit), and the company pays a further 5% dividend withholding tax (DWT). Therefore, the total tax credit on the dividend is 33% or $33,000.
Sarah (39% bracket) owes $39,000 tax but receives a $33,000 credit, leaving her to pay the $6,000 difference. Consider how this extra tax will be paid and when it is due.
Losses are Ring-fenced
Companies must ring-fence cryptocurrency losses, meaning these cannot offset personal income or profits from other entities.
There are some situations where the losses can be offset against other profit companies when they have at least 66% common shareholding (subvention payments or loss offsets).
Company losses are carried forward to offset future cryptocurrency or business profits within the same company.
Example:
Mike’s company makes a crypto loss of $50,000 in 2025 and he receives $150,000 of employment income.
He cannot offset this against his personal salary income. The loss must wait until future crypto gains occur in his company.
However, if the crypto was owned in his personal name, the loss could be offset resulting in a ~$16,500 tax refund.
Transferring Cryptocurrency into a Company
Transferring cryptocurrency into a company is a taxable event at market value. The company is buying the cryptocurrency from the individual.
You need robust documentation (independent valuations, market data, company minutes, agreement to sale and purchase, payment, contracts etc,) to substantiate the transfer.
An alternative (and the same tax position) is for an individual to sell all cryptocurrency to fiat in their individual capacity. Then take the fiat, loan that to the company (called a shareholder current account loan), and then have the company establish it’s investing or trading activity.
Remember to always keep personal cryptocurrency separate from any other person or company. The number one cause of increased complexity is when multiple people’s crypto investments are pooled together.
Mechanics:
Determine market value on transfer date.
Declare personal gains/losses on personal tax returns.
Record the company purchase of cryptocurrency on the company's balance sheet at market value at the time of purchase.
Ease of Selling Shares Without Triggering Gains
Unlike directly selling crypto, selling company shares (if held personally for long-term capital purposes) typically avoids triggering taxable gains.
This approach may be beneficial for future buyers who prefer purchasing shares in an entity rather than direct crypto assets. However, it is worth considering if there is a market to sell the company shares.
Example:
Lisa owns a company holding $500,000 in cryptocurrency.
Selling the crypto directly incurs tax (profit = the difference between the sale value and cost value).
However, selling shares in her company to an investor could potentially avoid triggering any taxable gains, assuming the shares were held as a long-term investment.
Recommendations
Consider your long-term investment objectives: Holding crypto in a company can be strategic and result in significant long term benefits but understand the implications, and risks.
Maintain accurate, thorough documentation: Independent valuations and comprehensive record-keeping are crucial.
Engage with experts early: Seek specialist crypto-tax advice to structure your investments optimally from the start.
Risks and Costs
Compliance risk: IRD scrutinizes cryptocurrency closely. Incorrect valuations or poor record-keeping can trigger audits or reassessments. We also offer a free online quiz to check if you're on track with your cryptocurrency tax compliance. It takes less than three minutes to answer 20 quick questions and you'll receive tailored insights and action steps straight to your inbox. Take the free scorecard here.
Administrative costs: Company structures have annual compliance and administrative costs (accounting, annual company office return, and filings).
Case Study: Mark's Crypto Company
Mark holds significant cryptocurrency investments personally. As part of his long term cryptocurrency investment plan, he transfers crypto into his NZ company. On transfer, Mark pays personal tax on the gains to date.
Initially, he benefits from the lower 28% company tax rate.
Three years later, Mark’s company distributes dividends from retained earnings. He pays additional personal tax (at 39%) but reduces the overall impact through imputation credits (the tax already paid by the company at 28%).
He pays the final “top-up” tax which was sitting in BTC for the past three years which due to BTC price increases allowed an additional 100% return on the 11% tax difference.
Thinking about using a company for your crypto investments? Reach out to our specialist crypto tax team to make sure your strategy is sound, compliant, and tax-efficient.
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Contact Us
Contact Tim Doyle for a call or meeting to discuss any cryptocurrency tax or accounting questions. Our office is in Cambridge, Waikato, or we can arrange a video conference call.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
