The Strategist

New Zealand greenlights salaries paid in cryptocurrencies

08/14/2019 - 11:19

The New Zealand Tax Authority legitimized salaries paid in cryptocurrencies, published a guide to relevant taxation.

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New Zealand has become the first country in the world to allow employees to receive salaries in cryptocurrencies. The corresponding decree was signed by the tax authority of the country. It comes into force on September 1, 2019 and will be valid for three years.

According to new changes in tax legislation, employees may receive salary (or a part of it) in cryptocurrency assets for services provided under an employment contract for a predetermined amount on a regular basis. It is also allowed to receive bonuses, commissions and other extra payments in digital currencies.

The payments will correspond to a fixed amount in ordinary money (for example, in New Zealand dollars), will be paid monthly and be a constant part of the employee’s salary (full payment of the salary in cryptocurrency is permitted as well). At the same time, the selected cryptocurrency must be pegged to at least one of the national currencies, and the employee must be able to freely exchange it for a standard means of payment.

"At the moment, cryptocurrencies are not directly accepted as payment of goods or services. Therefore, crypto assets that are not available for direct conversion to fiat money cannot be considered a salary, since they do not have sufficient monetary characteristics," the Tax Department said.

Assets that perform functions similar to stocks, shares or debt securities are not suitable, while self-employed citizens cannot receive salaries in cryptocurrencies.

The procedure for paying income tax is practically no different from the existing one. The salary paid in cryptocurrency is considered as income, the corresponding part of which is transferred to the fiscal service.

The new rules will enter into force on September 1, 2019 and will be valid for at least 3 years.

Today, payments in cryptocurrencies are also carried out in Japan: the cryptosphere in the country is legally regulated, and cryptocurrencies have the status of legal means of payment. At the moment, several companies around the world already pay employees part of the salary in cryptocurrency.