[2019-08-12] New Zealand Gives Greenlight for Cryptocurrency Income and Salary

[Saint-loup]

New Zealand Gives Greenlight for Cryptocurrency Income and Salary Payments

New Zealand has published a ruling by its tax authorities that allows paying workers’ salaries with cryptocurrency. The publication also includes specific requirements regarding this issue.

Now, according to information published by New Zealand’s tax regulators, cryptocurrency will be legalized and employees could begin to receive salaries in digital currency. The ruling is expected to begin officially, from the 1st of September.

New Zealand’s Inland Revenue Department recently released a tax information bulletin on Wednesday the 7th of August. It clearly states specifics about the new ruling under 91D of its Tax Administration Act 1994, which allows employers of labor disburse remunerations in crypto, with tax provisions as well.

https://www.coinspeaker.com/new-zealand-cryptocurrency/

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[o_e_l_e_o]

The article makes an error when it states the following:

Most specific of all the conditions is probably the part of the ruling that requires that “the value of the crypto-asset is pegged to one or more fiat currencies.” This suggests that only stablecoins will be usable as payment for salaries, significantly reducing the number of virtual assets that will not raise any violation issues.

If you read the actual Tax Information Bulletin from New Zealand's Inland Revenue Department (available here: https://www.classic.ird.govt.nz/resources/1/c/1c6029d0-611c-4a15-9cbf-b712129ab76c/tib-vol31-no7.pdf), what it actually states is as follows (emphasis mine):

The crypto-assets being paid 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.

The bulletin states that they would consider coins designed to be currency, such as bitcoin and litecoin, as well as coins designed for other purposes which can also act sufficient like currency, such as ether, to fall under this categorization, in addition to stablecoins. What they are ruling out is employers trying to make payments in useless altcoins or tokens that aren't easily (or at all) convertible to fiat.

The tax implication section of the bulletin also makes for an interesting read.

[Saint-loup]

The article makes an error when it states the following:

Most specific of all the conditions is probably the part of the ruling that requires that “the value of the crypto-asset is pegged to one or more fiat currencies.” This suggests that only stablecoins will be usable as payment for salaries, significantly reducing the number of virtual assets that will not raise any violation issues.

If you read the actual Tax Information Bulletin from New Zealand's Inland Revenue Department (available here: https://www.classic.ird.govt.nz/resources/1/c/1c6029d0-611c-4a15-9cbf-b712129ab76c/tib-vol31-no7.pdf), what it actually states is as follows (emphasis mine):

The crypto-assets being paid 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.

The bulletin states that they would consider coins designed to be currency, such as bitcoin and litecoin, as well as coins designed for other purposes which can also act sufficient like currency, such as ether, to fall under this categorization, in addition to stablecoins. What they are ruling out is employers trying to make payments in useless altcoins or tokens that aren't easily (or at all) convertible to fiat.

The tax implication section of the bulletin also makes for an interesting read.

Well, if you're right (and the journalist wrong) it's a very weird presentation and typography...
Why are they using dashes for introducing 2 different alternatives?

But I think you're right, the "either" is explicit IMO

The crypto-assets being paid 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.

[Theb]

But what do they expect to benefit from accepting stablecoins if this ruling is official? Are they just only aiming to diversify their citizens' salary payment option or are they also encouraging people to trade in cryptocurrencies because of it? Since we all know that Tether is the most popular stablecoin out there we can expect that New Zealanders will be technically receiving USD rather then a kind of cryptocurrency that isn't backed by any fiat currency, this is inevitable to happen especially when salary is on the line which will always be subject to volatility both the employer and employee will be risking value when they moved out of stablecoins as a alternative salary payment.

[buwaytress]

But what do they expect to benefit from accepting stablecoins if this ruling is official? Are they just only aiming to diversify their citizens' salary payment option or are they also encouraging people to trade in cryptocurrencies because of it? Since we all know that Tether is the most popular stablecoin out there we can expect that New Zealanders will be technically receiving USD rather then a kind of cryptocurrency that isn't backed by any fiat currency, this is inevitable to happen especially when salary is on the line which will always be subject to volatility both the employer and employee will be risking value when they moved out of stablecoins as a alternative salary payment.

Don't think this has anything to do with encouraging people to trade crypto, simply the easiest way to bring crypto salaried people into the tax fold. I get paid in crypto, and I know a growing number of freelancers and remote workers who would like the same.

It's a great way to own crypto, getting the actual dollar amount instead of losing on exchange fees and commission... And makes it easier for tax purposes if the state you're paying to recognises it.

Wonder what the taxable amount will be though. NZ dollar value or asset value?

[BitHodler]

Wonder what the taxable amount will be though. NZ dollar value or asset value?

I would assume the asset value since it isn't a unit of account. It has a dynamic price that moves up and down against the actual fiat currencies it's paired to. It's essentially just an altcoin if you think about it.

Stablecoins have lost their purpose the moment exchanges started to pair them against other fiat currencies and even the actual underlying fiat currency, which is retarded.

It shouldn't be possible to pump or dump a stablecoin far above its underlying fiat currency value. The moment exchanges introduced pairs like USD/USDT the purpose of these stablecoins has lots its significance.

[Saint-loup]

Wonder what the taxable amount will be though. NZ dollar value or asset value?

I would assume the asset value since it isn't a unit of account. It has a dynamic price that moves up and down against the actual fiat currencies it's paired to. It's essentially just an altcoin if you think about it.

Stablecoins have lost their purpose the moment exchanges started to pair them against other fiat currencies and even the actual underlying fiat currency, which is retarded.

It shouldn't be possible to pump or dump a stablecoin far above its underlying fiat currency value. The moment exchanges introduced pairs like USD/USDT the purpose of these stablecoins has lots its significance.

Where have you seen it was possible to "pump and dump" a stablecoin please?  Do you have some examples of that? I mean for a real one, truly collateralized? I'm not aware of that... There are bots on exchanges monitoring the prices and constantly making arbitrage, so if a stablecoin start to be pumped or dumped, they quickly fill the gap...

[LeGaulois]

Wonder what the taxable amount will be though. NZ dollar value or asset value?

Assets value of course, but a problem I can smell in the future:

- A government considers it as your regular income and considers asset value the day you got paid. That's fine.
- If the taxpayer holds his bitcoins (for let's say 2 years and sell), I'm sure some will find a way to tax the worker on capital gains and not regular income. Which can make a huge difference. They're so greedy.

For the worker, it can even become a nightmare when it will be time to send the Tax return, especially if he is already a Bitcoiner. Since we need to report anything, accounts, transactions number, date, assets, ref numbers, and so on..

Back to Crypto Income & Salary:
It's the case for a Japan company, they do pay a percentage of the salaries in Bitcoin, but at the same time, they increased the salaries by the same percentage. So it's like getting a 10% bonus on your income paid in BTC. I would, of course, accept that, can't refuse free money

There is also the case of Kraken paying a quarter of his employees in BTC https://twitter.com/krakenfx/status/1131631900517289984

By the way, the employee who took 100% bitcoin in 2012 retired in 2013.

[snipie]

Wonder what the taxable amount will be though. NZ dollar value or asset value?

Assets value of course, but a problem I can smell in the future:

- A government considers it as your regular income and considers asset value the day you got paid. That's fine.
- If the taxpayer holds his bitcoins (for let's say 2 years and sell), I'm sure some will find a way to tax the worker on capital gains and not regular income. Which can make a huge difference. They're so greedy.

For the worker, it can even become a nightmare when it will be time to send the Tax return, especially if he is already a Bitcoiner. Since we need to report anything, accounts, transactions number, date, assets, ref numbers, and so on..

Back to Crypto Income & Salary:
It's the case for a Japan company, they do pay a percentage of the salaries in Bitcoin, but at the same time, they increased the salaries by the same percentage. So it's like getting a 10% bonus on your income paid in BTC. I would, of course, accept that, can't refuse free money

There is also the case of Kraken paying a quarter of his employees in BTC https://twitter.com/krakenfx/status/1131631900517289984

By the way, the employee who took 100% bitcoin in 2012 retired in 2013.

They will figure out a solution to that issue.
I believe tax amount should be considered in bitcoin (for example) then converted to the mean price of bitcoin in that year.
Random exemple :
Yearly salary = 5 BTC
Tax = 0.5 BTC
Mean bitcoin price = $10,500
Then tax will be 0.5 x 10,500 = $5,250 or its equivalent in bitcoin paid by bitpay or an alternative payment method.

[Naida_BR]

Great move from New Zealand's government which can push mass adoption.
If they start paying in bitcoin they are going to accept tax payments in cryptocurrencies as well. This creates a domino effect where in many types of transactions between New Zealand and other entities Bitcoin is going to be used.