NEW ZEALAND GIVES THE GREENLIGHT TO CRYPTO SALARIES

The New Zealand Inland Revenue (Te Tari Takke) has issued a public ruling allowing employees to receive salaries in cryptocurrencies from 1 September 2019, reports The Accountant Online. The ruling applies where the crypto-assets:

  • are for services performed by the employee under an employment agreement;
  • are a fixed amount; and
  • form a regular part of the employee’s remuneration.

The payments may not be subject to a ‘lock-up’ period and must be directly convertible into a fiat currency (on an exchange); and either a significant purpose of the crypto-asset is to function like a currency; or the value of the crypto-asset is pegged to one or more fiat currencies. Such salaries will be subject to the PAYE rules.

The NZ Inland Revenue says an agreement to pay an employee in crypto-assets could be structured in two ways. The first way is as an agreed deduction from the employee’s gross salary or wages (where the employee’s after-tax remuneration is, in effect, being traded for a payment of crypto-assets). The second way is as a reduction in calculating the employee’s gross salary or wages (salary sacrifice).

Crypto-assets can have many of the characteristics of money; the types of crypto-assets covered by this ruling are readily transferable mediums of exchange, divisible, fungible, durable and hard to counterfeit.

However, the NZ taxman warns that crypto-assets are not ‘money’ as commonly understood, saying: “In particular, because crypto-assets are not issued by any government, they are not legal tender anywhere. Further, although acceptance of certain crypto-assets as payment for goods and services is increasing, they are not ‘generally accepted’ as payment. Given the extreme volatility experienced to date, there are also issues around some crypto-assets’ ability to be a store of value.”

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