New Zealand issues guidance on tax treatment of salary received in crypto-assets
Mon, 12 Aug 2019, 12:11 pm UTC
In a recent ruling, New Zealand’s tax authorities have said that it is legal for companies to pay its employees in cryptocurrencies. They have also provided guidance on the tax treatment of such remuneration, Cointelegraph reported.
The New Zealand Inland Revenue Department has summarized the provisions of the public ruling, made under s 91D of the country's Tax Administration Act 1994 in a tax information bulletin dated August 07, 2019.
According to the document, the ruling applies to such circumstances where the crypto-asset payments are for services performed by the employee under an employment agreement and include bonus, commission, gratuity, overtime pay, or other pay of any kind. These payments should be in a fixed amount and form a regular part of the employee’s remuneration.
Importantly, the ruling applies only to salary and wage earners, not self-employed taxpayers. In addition, the crypto-assets being paid should not be subject to a “lock-up” period and should be convertible into fiat currency. To that end, the document added that “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.”
“To be considered “salary or wages” the crypto-assets need to be sufficiently similar to existing notions of salary and wages,” it said.
“In the current environment where crypto-assets are not readily accepted as payment 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.”
The ruling was signed by New Zealand‘s director of public rulings, Susan Price on June 27, 2019. It will go into effect for a period of three years beginning on September 1, 2019.
Tax authorities around the globe are increasingly making efforts to ensure tax compliance by crypto owners.
Just recently, British tax authority HM Revenue & Customs (HMRC) was reportedly asking cryptocurrency exchanges to provide the name and transaction histories of their customers, as the office attempts to recover unpaid taxes. The Department of Federal Revenue of Brazil (RFB) has also issued published a new guideline that states that crypto traders must declare their dealings to tax authorities. The Indian Ministry of Finance’s Office of Deputy Director of Income Tax is also reportedly sending letters to citizens asking details about their cryptocurrency-related dealings.
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