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New Zealand officially legalizes paying employees with crypto-currency

New Zealand issued a tax bulletin this month officially recognizing that it is legal for employers to pay employees with crypto-currencies like Bitcoin.

The crypto-currencies just have to be able to be converted into fiat currency… which is typically the case with every major crypto.

This is another step towards working crypto-currencies into the system, instead of killing their adoption due to ambiguity about legal issues.

This is a public ruling made under s 91D of the Tax Administration Act 1994.

Taxation law – All legislative references are to the Income Tax Act 2007 unless otherwise stated.
This Ruling applies in respect of s RD 3.

The Arrangement to which this Ruling applies – The Arrangement is the payment of remuneration to an employee in crypto-assets in circumstances where the crypto-asset
payments:

• are for services performed by the employee under an employment agreement;
• are for a fixed amount; and
• form a regular part of the employee’s remuneration.

This Ruling applies only to salary and wage earners, not self-employed taxpayers; and where the crypto-assets being paid:
• are not subject to a “lock-up” period;
• can be converted directly 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.

This Ruling does not apply where the crypto-asset provided is a “share” for income tax purposes and is received under an
“employee share scheme” as defined in s CE 7.

How the taxation law applies to the Arrangement

The taxation law applies to the Arrangement as follows: – The crypto-asset payments are “PAYE income payments” under s RD 3 and are subject to the PAYE rules.

The period or tax year for which this Ruling applies – This Ruling will apply for a period of three years beginning on 1 September 2019.

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