After a long internal debate regarding the payment of salaries in fiat currency only, the New Zealand government has given the green light to companies to pay salaries in cryptocurrencies.
The development reported in an August bulletin released by the Inland Revenue Department (IRD), the New Zealand office responsible for taxation, notes under the Income Tax Act (in relation to section RD 3) that an employee in the states can be paid salaries in crypto assets.
However, the development today equally means a new channel of revenue for the government, even though cryptocurrency is still not considered as money in the country.
As long as taxes are concerned in New Zealand, every salary paid with digital currency will be treated as PAYE (Pay as You Earn) income payments as employers are expected to make the deductions and pass them directly to the tax department.
The new ruling applies to situations where cryptocurrencies: are used to pay for employee services under an employment contract, form a regular part of employee’s payments, or are for a fixed amount. This, however, does not apply to self-employed taxpayers.
The IRD notes that the ruling also only applies to cases where the cryptocurrencies being paid are not subject to a lock-up period; can be converted directly on an exchange to a fiat currency; the cryptocurrency is to function as a currency, or the value of the cryptocurrency is pegged to one or more fiat currencies.
The ruling does not apply to a situation where the cryptocurrency is a “share” for income tax purposes and received under an “employee share scheme.”
The new ruling signed on Jun. 27, by the IRD’s director of public rulings, Susan Price, will only exist for three years beginning on Sept. 1, 2019.
Despite the development, the New Zealand government still see cryptocurrencies as property, saying it is something completely different, although it treats them as money, and tax too.
“Crypto-assets are not “money” as commonly understood (at least not at the present time). In particular, because crypto-assets are not issued by any government, they are not legal tender anywhere,” the report reads.