A ruling by New Zealand’s Tax Department has made Bitcoin a legal mode of paying employees’ salary. According to the Tax department, half of the employee’s gross salary can be paid in bitcoin or another crypto asset. It is also mentioned in the official ruling that paying in bitcoin is only applicable to salary and wage earners, and not to self-employed taxpayers. Change in money interest rates on underpayments and overpayments of taxes and duties were also announced in the ruling.
The changes will be implemented from 29th August onwards. This ruling considers the income tax treatment of cryptocurrencies received by employees as part of their regular remuneration and therefore subject to PAYE ( Pay-as-you-earn tax). The Inland revenue acknowledged that it is becoming common for employees, particularly those working in crypto-asset-related industries to receive remuneration in cryptocurrencies.
The ruling states, 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, and the second way is as a reduction in calculating the employee’s gross pay.
The official document included the following example to help understand the application of ruling;
A crypto company employee, Ken’s salary is NZ$10,000 per month before tax. Half of Ken’s salary is payable in NZD which is directly credited to his bank account. The other half is payable in bitcoin which gets transferred to his bitcoin wallet. Tax should be calculated on the $10,000 gross payment and withheld and paid to the tax department. If Ken here in this situation is subject to child support or student’s loan deduction, then employee’s guide and PAYE calculator which both are available on Inland revenue’s website can be used to calculate the total amount to be paid to Ken in crypto and fiat.