The New Zealand Tax Department has just issued guidance on salary payments made in Bitcoin and other cryptocurrency. This confirms that such payments are entirely within the law, and clarifies how to deal with them in accounting.
Pay Me In Bitcoin
The ruling covers payment of wages or salary (including bonuses) either wholly or in part using cryptocurrency. Payments must be for services performed as employment, and the ruling does not apply to any crypto-assets provided as a ‘share’ under an employee share scheme.
The crypto-assets paid should be able to be directly converted to fiat currency via an exchange, and a significant functionality of the asset should be as a currency.
When these conditions met, the new tax rules treat payment in cryptocurrency as a normal part of the employee’s salary or wages. As such, they are subject to pay as you earn (PAYE) income tax at the usual rates. This should be deducted by the employer and paid to the inland revenue (in New Zealand dollars).
The guide also gives advice and tools for calculations arising from national schemes such as student loan repayments, working families entitlements, and Kiwisaver schemes.
Savings In Bitcoin
The real benefit from this comes if an employee is able to save some of their earnings paid in cryptocurrency. New Zealand does not have Capital Gains Tax. Therefore, any Bitcoin or other cryptocurrency which is held as an investment will not be subject to further tax.
This differs from last year’s UK guidelines. In these, tax is applied at source via income tax, then again on disposal through capital gains tax. Crypto-earnings in New Zealand therefore, suffer less of a tax burden if saved.
Crypto Salaries Easier Than Ever
As Bitcoinist has reported, paying employees in Bitcoin is becoming easier than ever, although Peter Schiff believes there is no demand. Further making a mockery of Schiff’s claims, is the groundswell of calls for Bitcoin payments by NFL stars.
Some commentators suggest that increasing payment of wages in Bitcoin will spur an increase in retail acceptance of cryptocurrency. This, of course, should lead to more interest in employees wanting to be paid in cryptocurrency, and so on and so on.
New Zealand certainly seems to be paving the way with a simple and inclusive taxation system.
What do you make of New Zealand’s new crypto-friendly tax laws? Add your thoughts below!
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