The tax authority in New Zealand now legally permits people to receive their salaries in Bitcoin or in another cryptocurrency. Cryptocurrency salaries will be subjected to taxation similar to fiat wages.
According to the new tax information bulletin released on August 7, the ruling is scheduled to come to effect on September 1, and it will be valid for three years. The document contains more information regarding the rules and cryptocurrency salaries that have been made legal by the New Zealand Inland Revenue Department.
However, certain conditions have been attached to the ruling. For instance, the payment in digital currency must be tax compliant. In that, it must respect normal salary conditions like being a fixed amount. This rules out payments from shares and other equities.
Payments to periodic services, other benefits and commissions can also be paid in cryptocurrencies. The document stated that cryptocurrency is not a legal tender and that the cryptocurrency salaries taxation can only be applied to full or part-time employees, not those that are self-employed.
The crypto payments can only be part of a regular fiat wage.
Another condition that the crypto has to meet in order to be accepted for salary payment is that it must not have a lock-up period and it must be convertible into fiat currencies.
“In the current environment where crypto-assets are not readily accepted as payments for goods and services, the Commissioner’s view is that crypto-assets that cannot be converted directly into fiat currency on an exchange are not sufficiently “money-like” to be considered salary or wages.”
Also, the cryptos used as payment for salaries must work as currencies, not as securities.
“Some crypto-assets are designed to function as an alternative to fiat currency in the sense they provide a general-purpose peer-to-peer payment system. Examples are bitcoin, bitcoin Cash (BCH), bitcoin Gold (BTG), and Litecoin (LTC). Some crypto-assets are designed with other functions in addition to use as a currency, but the currency purpose is still a significant one. Ether is a common example of this. The Commissioner’s view is that payment in these types of cryptoassets (where conversion directly into a fiat currency on an exchange is possible) is sufficiently “money-like” to come within the ordinary meaning of salary or wages.”
Featured image: Coingape
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