There is no denying that cryptocurrencies are here to stay, and as surprising as it may sound, there are still numerous things for them to achieve. One of them is getting more people to receive their monthly salaries or payments in crypto assets instead of fiat currencies, and there are good news coming from Oceania in that front.
New Zealand, more specifically the Inland Revenue Department (IRD, which functions as the nation’s tax regulator and office) will now make it legal for people to receive crypto payments as a form of salary, which is a ground-breaking development that could have a domino effect on other countries. These salaries would also be properly taxed.
Details and Conditions to be met
The announcement was made public in the monthly bulletin of the Inland Revenue Department, on the August issue. The office’s new ruling, under the Income Tax Act, section RD 3, explained that any worker or employee could receive his or her payment in cryptocurrencies, with the condition that said payment is the result of services performed under an employment contract, for a fixed amount, and is a recurrent or regular portion of the worker’s remuneration.
Another existing condition is that the crypto asset in question can be exchanged for fiat money and, according to the IRD, needs to have as a primary objective to act like a currency or be tied to another fiat currency’s value or price.
“In the Commissioner’s view, crypto-assets that cannot be converted or sold by the employee for a material period of timeafter payment does not sufficiently resemble a payment of salary or wages,” it can be read in the document.
“Pay as You Earn”
The crypto assets used as payment forms that are provided as shares for income tax matters, and are therefore obtained under a worker share scheme, do not apply for the previously detailed ruling, however.
For the new ruling purposes, the salaries paid in cryptocurrencies will fall into the PAYE category. PAYE means “pay as you earn:” the payments would be deducted to the employee’s recurring income and will pass to the tax department automatically.
The new regulations will start being official on September 1st, 2019, and will apply for a three-year period until 2022. The ruling was signed on June 27th by Susan Price, currently functioning as the IRD’s Director of public rulings.
Making the Law more Specific and Modern
The previous law in the country dictated that employee’s salaries payment form was only through “money.” The nation’s official currency is the New Zealand dollar.
With this development, New Zealand becomes the first nation to legally back up companies that pay their staffers with digital assets. The move puts the controversial crypto asset class on the same level as regular, mainstream payment forms.
In a world in which cryptocurrencies and all related services are virtually all unregulated, the New Zealand’s events are a massive step in the right direction.
By Andres Chavez