New Zealand: Employees to Receive Salaries in Crypto

On August 12th, 2019, New Zealand announced that new regulations on the use of cryptocurrency to pay salaries would take effect as from 1^st September.

Cryptocurrency has been a heated discussion for regulators after catching the public’s attention in 2017. Its parabolic surge in price is what brought the currency to everyone’s attention.  Now, employers are legally paying their employees in crypto.

Issued Statement Provides Clarification

Clarification on these matters was brought to the table by the Inland Revenue Department of New Zealand which stated cryptocurrency being used to pay employees’ salaries.

Several cases will qualify employers to pay salaries with crypto assets, according to the statement. The employer will be bound to the employee through a functional employment agreement to make the eventuality of crypto salaries possible. The deal comes to play when the employer and employee have agreed on the fixed amount or when it is a regular part of the employee’s pay.

Rules Only Apply To Salaried Individuals and Wage Earners

It is worth noting that the new regulations apply only to salaried employees and wage earners. Self-employed individuals cannot take advantage of this. Furthermore, the rules won’t apply if the payment is under a lock-up period, which happens only when the cryptocurrency can be converted to fiat currency.

However, these regulations come with additional requirements. First, the cryptocurrency should be pegged to a fiat currency. What this means is that payments should be carried out in stable coins only.

Another condition states that the crypto-asset should function as a currency. This condition will allow employees to receive their salaries in bitcoin, given that it is a peer-to-peer currency.

Earnings to Be Taxed Like Regular Salaries

Additionally, crypto-asset payments will be under PAYE terms. This means that the cryptocurrencies will be subject to taxation laws, which will be applied directly, as is the case for regular pay. The ruling will take effect on 1^st September, this second quarter of this year according to the document, and will have a period of 3 years.