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. Now, some countries have even gone so far as to legalize employers to pay their employees in crypto. New Zealand is one such country and starting September 1st, the ruling will come into effect.
Paying Salaries With Bitcoin
The Inland Revenue Department of New Zealand issued a statement which clarifies the matter of cryptocurrencies being used to pay for salaries in the country.
According to the document, there are several cases where 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, when it’s for a fixed amount or when it is a regular part of the employee’s remuneration.
Now, it’s also worth noting that the ruling only applies to salary and wage earners. In other words, self-employed taxpayers won’t be able to take advantage. Moreover, this won’t be possible if the payment is subjected to a lock-up period and only if the cryptocurrency can be converted directly into a fiat currency.
There’s A Catch
In addition to all of the above, however, the new ruling includes a couple of additional requirements which can be interpreted rather broadly.
The first one is that the value of the cryptocurrency should be pegged to one or more fiat currencies. This potentially signals that the legislators have decided to allow salary payments to be carried out with stable coins entirely.
Fortunately, however, there’s an additional condition which should allow employees to receive their salaries in Bitcoin as well. It says that the crypto-asset should have a significant part of its purpose to function as a currency. And we all know that one of the main intentions behind Bitcoin is to serve as a digital peer-to-peer currency.
Now, it’s also worth noting that all cryptocurrency payments are going to be considered as PAYE payments. In New Zealand, employees are taxed directly from their salary or their wage 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 force on September 1st this year and it will have a period of three years.