Cryptocurrencies have been a hot topic for regulators in the past couple of years, as they caught the public’s attention following their parabolic price surge in 2017. Some countries have even gone so far as to allow employers to pay their employees in crypto. New Zealand is one such country, with a ruling set to come into effect on September 1.
New Zealand’s Inland Revenue Department has issued a statement which clarifies the matter of cryptocurrencies being used to pay salaries in the country.
According to the document, there are several cases in which employers will be able to pay salaries with crypto assets. This will be possible when they are devised for payments for services performed by the employee under a functional employment agreement, whether it’s for a fixed amount or if it is a regular part of the employee’s remuneration.
Now, this only applies to salary and wage earners. In other words, self-employed taxpayers won’t be able to take advantage of the ruling. Moreover, it won’t be possible if the payment is subject to a lock-up period, and the cryptocurrency must be directly convertible into a fiat currency.
In addition to all of the above, however, the new ruling includes a couple of additional requirements which could be interpreted rather broadly.
The first one is that the value of the cryptocurrency in question must be pegged to one or more fiat currencies. This potentially signals that legislators have decided to allow salary payments to be carried out entirely with stablecoins.
Fortunately, however, there’s an additional condition which should allow employees to receive their salaries in Bitcoin as well. It stipulates that the desired crypto asset should be meant to function as a currency. And we all know that one of Bitcoin’s main intentions is to serve as a digital peer-to-peer currency.
It’s also worth noting that all cryptocurrency payments will be considered PAYE payments. In New Zealand, employees are taxed directly from their wages or salaries, and this system is referred to as PAYE. In short, it means that you pay as you earn. Moreover, the taxation laws will apply directly, as they do for regular payments.
According to the statement, the ruling will take effect on September 1 and remain in force for three years.
This article was first published on: Aug 12, 2019