The New Zealand Inland Revenue (Te Tari Takke) has issued a public ruling allowing employees to receive salaries in cryptocurrencies from 1 September 2019. The ruling applies where the crypto-assets:
- are for services performed by the employee under an employment agreement;
- are a fixed amount; and
- form a regular part of the employee’s remuneration.
The payments may not be subject to a ‘lock-up’ period and must be directly convertible into a fiat currency (on an exchange); and either a significant purpose of the crypto-asset is to function like a currency; or the value of the crypto-asset is pegged to one or more fiat currencies. Such salaries will be subject to the PAYE rules.
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The NZ Inland Revenue says an agreement to pay an employee in crypto-assets could be structured in two ways. The first way is as an agreed deduction from the employee’s gross salary or wages (where the employee’s after-tax remuneration is, in effect, being traded for a payment of crypto-assets). The second way is as a reduction in calculating the employee’s gross salary or wages (salary sacrifice).
Crypto-assets can have many of the characteristics of money; the types of crypto-assets covered by this ruling are readily transferable mediums of exchange, divisible, fungible, durable and hard to counterfeit.
However, the NZ taxman warns that crypto-assets are not ‘money’ as commonly understood, saying: “In particular, because crypto-assets are not issued by any government, they are not legal tender anywhere. Further, although acceptance of certain crypto-assets as payment for goods and services is increasing, they are not ‘generally accepted’ as payment. Given the extreme volatility experienced to date, there are also issues around some crypto-assets’ ability to be a store of value.”
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