After a new ruling, New Zealand has just become the first country to legalise cryptocurrency salary payments.
In a bulletin published on 7 August, New Zealand announced that it would be the first country in the world to legally support companies that want to pay employees in cryptocurrencies.
The Inland Revenue Department (IRD), which is New Zealand’s tax office, published the new ruling in its August bulletin under the Income Tax Act.
It was signed on 27 June by the agency’s director of public rulings, Susan Price, and will apply for three years, starting from 1 September 2019.
The IRD stated that salaries and bonuses can be paid in crypto assets under a few conditions: assets must be for services performed by the employee under an employment agreement, for a fixed amount, and form a regular part of the employee’s renumeration.
Salaries paid in crypto assets will be taxed as PAYE income payments, which are deducted by the employer and transferred to the IRD. The cryptocurrency of choice must be pegged to at least one regular currency, and it must be possible to convert it directly into a traditional form of payment.
The ruling will exclude self-employed workers from switching their income to cryptocurrency.
London-based solicitor Thomas Hulme, who works for Mackrell Turner Garrett, told the Financial Times: “[The move is] another step towards governments recognising that actually people are wanting to be paid in [cryptocurrency]. Some people would rather deal with their wealth in that medium.”
The Financial Times also pointed out that the ruling highlights difficulties that regulators have experienced in the past. IRD defines digital currencies and assets as property and not as money or legal tender. However, the IRD decided to tax cryptocurrencies because they share many characteristics with money.
Prior to this new ruling, salaries in New Zealand were only payable in the New Zealand dollar, according to Coindesk.