New Zealand has become the first known country to allow employees to receive salary payments in cryptocurrencies. The country authorized the tax authority to not only allow income to be paid in these digital currencies, but to also set new rules on how payments should be taxed.
In its monthly bulletin, the agency published a new set of guidelines under their Income Tax Act (section RD 3). This section states that an employee can be paid their regular salary in crypto assets, as long as the payments are made according to the employment contract. This means that it must be for a fixed amount that is paid on a regular basis.
While the new revision to the act allows for payment through digital currencies, it still requires employers to pay tax on that income. To accommodate this, the act stipulates that whatever cryptocurrency is used to make payments must be easily converted to a form of fiat currency.The act makes this clear in section RD 3 where it states:
Where crypto assets are not readily accepted as payment for goods and services, the Commissioner’s view is that crypto assets that cannot be converted directly into fiat currency on an exchange are not sufficiently ‘money-like’ to be considered salary or wages.
This not only ensures that the employee is able to readily convert the coin into a currency that works best for them but also makes it easier for the Inland Revenue Department to be able to collect taxes.
According to the act, crypto and payments are calculated dependent upon the value in comparison to the New Zealand dollar on the date the employee was paid. Conversion rates are thus calculated in the same way for taxes and must be made in accordance with the country’s anti-money laundering laws, which not only govern the currencies but the exchanges themselves. This is why the new regulation includes the provision:
Which exchange (or exchanges) is appropriate will depend on the circumstances. Using a New Zealand-based exchange listed on the Financial Service Providers Register will be appropriate.
Previously, salaries were only allowed to be paid according to the term “money,” which was making it clear that only the New Zealand dollar was acceptable. However, the act that was signed on June 27 enables employers to be able to use their crypto assets to be able to pay employees. This new law will be in effect for the next three years starting on September 1 of this year.
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.
