Tax issues for domain name traders

Inland Revenue provide some guidance on their website for the tax treatment of domain name trading.

Basically, you're liable for tax on the profit of domain name sales if you registered or purchased them with the intent of selling them. This sounds pretty clear-cut for domain name traders but is less so for other people. IRD's website is unclear on what should happen if you purchased a domain name for development but just happened to sell it since you no longer needed it or since someone made you a good unsolicited offer.

For people or entities in the business of domain name trading, the domain names should be treated as trading stock when it comes to producing the balance sheet, meaning that they should generally be valued at cost price and cannot be depreciated.

Fees paid for the initial registration or purchase of a domain name cannot be deducted as a business expense, however the ongoing annual/monthly registration fees are deductable.