New Zealand has become the first country in the world to legally back companies that pay employees in cryptocurrency.
The ruling by New Zealand’s tax authority allows salaries and wages to be paid in crypto including Bitcoin, as of September 1.
The only stipulations are that the payments need to be made in regular fixed amounts, form a part of an employee’s regular renumeration and the cryptocurrency can either be pegged to, or easily converted into fiat.
The ruling applies as of September 1 this year. Previously salaries were only payable in ‘money’ which effectively meant the NZ dollar.
Stark difference to Australia
The ruling by New Zealand’s Inland Revenue on August 7 excludes self employed tax payers from earning income in crypto.
Companies that pay their employees in cryptocurrency will be able to deduct tax under the pay as you earn scheme.
The NZ approach is in stark contrast to Australia where the head of finance at ASX-listed blockchain company DigitalX, Jonathan Carley, has called for reform of the laws around paying employees in cryptocurrency.
Carley, who worked in the auditing division of accounting firm BDO for seven years, said that Australian companies who pay their employees, or for services, in crypto are liable for the Fringe Benefits Tax.
“It makes it really unattractive because the company gets whacked by paying FBT,” he said. “The company will wear the costs of around 47 cents in the dollar.
Long overdue recognition
Solicitor Thomas Hulme from London’s Mackrell Turner Garrett, said the move amounted to “another step towards governments recognising that actually people are wanting to be paid in [crypto].”
He added that such demand represented a cultural change: “Some people would rather deal with their wealth in that medium.”
Wellington’s Inland Revenue had previously defined crypto assets as property, noting that crypto was not defined as “money” anywhere, and therefore are not legal tender. However, the authority is now going to tax crypto-salaries as money because “some cryptoassets have many of the characteristics of money; for example, being . . . divisible . . . and hard to counterfeit.”