The New Zealand Inland Revenue Department (IRD), the country’s tax regulator, has made it legal for firms to pay employee salary using cryptocurrencies, as long as the income is taxed accordingly.
The latest development was confirmed in the agency’s August Bulletin and effectively alters an age-long rule that mandated firms to use only “money” or precisely the country’s currency for salary payment.
However, the amended Income Tax Act in relation to section RD 3 clearly states that an employee can be paid salaries in crypto assets if the payment is for services they performed under an employment contract, for a fixed amount, and form a regular part of their remuneration.
Another section of the bulletin mentioned that any such crypto-asset used for salary payment should be easily exchangeable for fiat currency. Also, the cryptocurrency will be one designed to serve as currency or preferably backed by at one least one or more fiat currencies as in the case of stablecoins.
For employees, who receive cryptocurrencies as salaries, the payment will be taxed under the PAYE (pay as you earn) income law, which allows the employer to deduct the tax before issuing payment.
Meanwhile, another notable provision made under the amended tax rules in New Zealand concerns crypto assets that are provided as a ‘share’ for income tax purposes. Under such a circumstance, the current ruling will not apply according to the tax regulator.
The new ruling introduced for New Zealand firms will go into force from Sept 1, 2019, and will last for three years as confirmed by Susan Price, the agency’s director for Public Ruling.
In another report concerning crypto taxation, Stmarket.co noted last month that the U.S Internal Revenue Service (IRS) sent letters to ask members of the public who used cryptocurrencies in the past to pay taxes they owe or file amended tax returns.