As per the new ruling, the tax authorities of New Zealand have allowed the companies to make the monthly payouts to their employees in bitcoin or any other kind of cryptocurrency. The bulletin was published on 7th August 2019 by the Inland Revenue Department (IRD) according to which the ruling had been added to the Tax Administration Act 1994.
The 1994 act lays out the taxation responsibilities of New Zealand’s government departments. But the deduction of income taxes will have to be done according to the PAYE (Pay as you Earn) framework as per the Income Tax Act of 2007.
The ruling will come into effect from September 1st as New Zealand joins the league of countries where bitcoin salary payouts have been deemed legal.
There are certain clauses in the new ruling that might limit its adoption on a mass scale. As per the ruling, only the officially employed resources that are salary and wage earners who can receive the payments in cryptocurrencies. The self-employed tax-payers will not fall under this ruling though.
Also, this mode of payments can be processed only for a defined amount. According to the issued bulletin, the salary paid in cryptocurrency will not have any lock-up period and must be converted into fiat currency directly.
Moreover, it won’t be possible if the payment is subject to a lock-up period, and the cryptocurrency must be directly convertible into a fiat currency.
The ruling has been introduced to replace the usage of fiat for salary payments. Susan Price, New Zealand‘s director of public rulings, on June 27th officially signed the ruling which will stay in effect for three years after being implemented from September 1, 2019.
As we are moving towards a digital economy, the employees working across borders can circumvent the remittance fees and long times. Analysis of the ruling by IRD is a clear indicator that the tax department is trying to bring the companies under its own umbrella who are skipping the tax deductions by paying out salaries in cryptocurrencies. With the introduction of this ruling, they will be able to earn more dollars as tax.
The employees may not be an advantage as they will be paid as per the fixed fiat amount. That means they cannot ride the wave of price volatility of cryptocurrencies. They might find the salary they received to have devalued in the next 24 hours if they chose not to get it exchanged immediately.
Although the benefit seems to be less, a lot of employees are already showing a positive inclination towards the introduction.
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Contributing Writer for the Crypto Intelligence Agency