New Zealand’s Inland Revenue Department (IRD) has made it legal for companies to pay their employees in Bitcoin and other cryptocurrencies.
The tax bulletin published on August 7, 2019, also guided how income in cryptocurrency should be declared by individuals. The ruling will apply for three years starting on September 1, 2019.
New Zealand Caters to Cryptocurrency Users
According to the bulletin, salaries and wages to employees can be paid in cryptocurrencies as long as the payments are in regular intervals and fixed amounts. Also, companies can only pay out in cryptocurrency to those working under an official employment contract. Since payments such as shares and equities do not fall under this ruling, they cannot be paid using the asset class. The ruling will, therefore, only apply to salary and wage earners and will not include self-employed workers.
Salaries paid in cryptocurrency will come under the pay as you earn (PAYE) framework, which will allow companies to deduct income taxes at source. The ruling also states that the cryptocurrency-based salary must not have a lock-up period and should be directly convertible to fiat currency on any exchange of the employee’s choosing like Binance or Coinbase. The agency also mentioned that stablecoins can be used to pay salaries since their value is often pegged to one or more fiat currencies.
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The move seems to be focusing on companies that are already paying their employees in cryptocurrencies. It also highlights the difficulties tax authorities have faced in setting up a legal framework for cryptocurrency-based payments. The ruling was signed on June 27, 2019, by Susan Price, the Director of Public Ruling.
Thomas Hulme, a solicitor at Mackrell Turner Garrett, a London-based law firm, said that governments are recognizing that people want to get paid in cryptocurrency. He added that being paid in cryptocurrency is “a bit crazy” since quite a bit of price fluctuation still exists.
Countries Moving Forward to Regulate and Tax Cryptocurrencies
New Zealand, with its recent ruling, has joined a list of countries that have tried to regulate the usage of cryptocurrencies. In the UK, Her Majesty’s Revenue and Customs (HMRC) began requesting customer data from cryptocurrency exchanges to summon individuals that failed to pay their taxes. The agency is reportedly seeking data that goes back two to three years.
The U.S. Internal Revenue Service (IRS) in July sent over 10,000 tax compliance letters to cryptocurrency investors, asking them to amend their tax filings and ordering them to pay their taxes with interest and penalties. There are also reports that the IRS is going to be using Grand Jury subpoenas on tech firms like Apple, Google and Microsoft to get their hands on cryptocurrency-related activity of users.
Do you think New Zealand’s ruling will motivate more companies to offer payments in cryptocurrency? Let us know your thoughts in the comments below.
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