New Zealand Allows for Employee Payments to be Made in Cryptocurrency

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A recently published ruling  (pdf) from the New Zealand tax authorities has opened the doors for employers in New Zealand to pay their staff in cryptocurrencies. In the light of places like India whose central bank has fought tooth and nail to ban cryptocurrency and won the move from New Zealand is quite progressive.

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Holding, selling or dealing in cryptocurrencies such as Bitcoin could soon land you in jail for 10 years in India.  The “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019” draft has proposed 10-year prison sentence for persons who “mine, generate, hold, sell, transfer, dispose of, issue or deal in cryptocurrencies. Besides making it completely illegal, the bill makes the holding of cryptos a non-bailable offence. 

Bitcoin is also essentially banned in China. All banks and other financial institutions like payment processors are prohibited from transacting or dealing in Bitcoin. Cryptocurrency exchanges are banned. The government has cracked down on miners.

El Banco Central de Bolivia has banned the use of Bitcoin and other cryptocurrencies. Columbia does not allow Bitcoin use or investment. Bitcoin and other cryptocurrencies were banned in Ecuador by a majority vote in the national assembly. 

From the report:

“If the appropriate valuation cannot be obtained from a New Zealand-based exchange, an overseas-based exchange can be used. For some “altcoins” (crypto-assets other than bitcoin) it may be necessary to convert into US dollars or another fiat currency, and then convert into NZD.”

Example 1: Calculating PAYE where gross-up is not required. Anaru is employed by Cryptowonderland Ltd. In addition to his $150,000 salary, Anaru’s contract provides for an NZ$10,000 (gross) bonus payable in bitcoin if Cryptowonderland’s profit exceeds the previous year’s. Cryptowonderland has an exceptional year and Anaru receives his bonus. The bonus is subject to PAYE. NZ$3,330 ($10,000 × 0.33) must be paid to the Commissioner (in New Zealand dollars). The net amount of $6,670 worth of bitcoin can be transferred to Anaru’s bitcoin wallet.

Example 2: Calculating PAYE where conversion is required. Deidre is employed by Cryptowonderland Ltd. In addition to her $180,000 salary, Deidre’s contract provides for a gross payment of 10 Litecoin if Cryptowonderland’s profit exceeds the previous year’s. Cryptowonderland has an exceptional year and Deidre is entitled to her bonus. Cryptowonderland must calculate the NZ$ equivalent of the Litecoin on the day that Deidre is paid. In accordance with its standard practice, Cryptowonderland uses conversion rates obtained at approximately 5pm from a New Zealand-based exchange that meets it KYC/AML requirements. At the relevant time, 10 Litecoin is worth NZ$1,140. The bonus is subject to PAYE. NZ$376.20 ($1,140 × 0.33) must be paid to the Commissioner (in New Zealand dollars). The net amount of $763.80 worth of Litecoin can be transferred to Deidre.

Example 3: Calculating PAYE where gross-up is required. Sarah is employed by Cryptowonderland Ltd. She receives an annual salary of $130,000 direct credited to her bank account. In addition, Sarah’s contract provides for annual bonus payments if Sarah’s performance targets are met. Sarah met all of her performance targets this year and was paid a bonus of NZ$5,000 (net) worth of ether. 48. The payment is subject to PAYE. When calculating the PAYE payable, the $5,000 needs to be grossed up ($5,000 ÷ 0.67 = $7,462.69). PAYE is then calculated on the gross amount ($7,462.69 × 0.33 = $2,462.69) and paid to the Commissioner (in New Zealand dollars).

Sounds like a great way to ensure taxes are paid. 

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About Richard Kastelein

Founder and publisher of industry publication Blockchain News (EST 2015), a partner at ICO services collective Token.Agency ($750m+ and 90+ ICOs and STOs), director of education company Blockchain Partners (Oracle Partner) – Vancouver native Richard Kastelein is an award-winning publisher, innovation executive and entrepreneur. He sits on the advisory boards of some two dozen Blockchain startups and has written over 1500 articles on Blockchain technology and startups at Blockchain News and has also published pioneering articles on ICOs in Harvard Business Review and Venturebeat. Irish Tech News put him in the top 10 Token Architects in Europe.

Kastelein has an Ad Honorem - Honorary Ph.D. and is Chair Professor of Blockchain at China's first Blockchain University in Nanchang at the Jiangxi Ahead Institute of Software and Technology. In 2018 he was invited to and attended University of Oxford's Saïd Business School for Business Automation 4.0 programme.  Over a half a decade experience judging and rewarding some 1000+ innovation projects as an EU expert for the European Commission's SME Instrument programme as a startup assessor and as a startup judge for the UK government's Innovate UK division.

Kastelein has spoken (keynotes & panels) on Blockchain technology in Amsterdam, Antwerp, Barcelona, Beijing, Brussels, Bucharest, Dubai, Eindhoven, Gdansk, Groningen, the Hague, Helsinki, London (5x), Manchester, Minsk, Nairobi, Nanchang, Prague, San Mateo, San Francisco, Santa Clara (2x), Shanghai, Singapore (3x), Tel Aviv, Utrecht, Venice, Visakhapatnam, Zwolle and Zurich.

He is a Canadian (Dutch/Irish/English/Métis) whose writing career has ranged from the Canadian Native Press (Arctic) to the Caribbean & Europe. He's written occasionally for Harvard Business Review, Wired, Venturebeat, The Guardian and Virgin.com, and his work and ideas have been translated into Dutch, Greek, Polish, German and French. A journalist by trade, an entrepreneur and adventurer at heart, Kastelein's professional career has ranged from political publishing to TV technology, boatbuilding to judging startups, skippering yachts to marketing and more as he's travelled for nearly 30 years as a Canadian expatriate living around the world. In his 20s, he sailed around the world on small yachts and wrote a series of travel articles called, 'The Hitchhiker's Guide to the Seas' travelling by hitching rides on yachts (1989) in major travel and yachting publications. He currently lives in Groningen, Netherlands where he's raising three teenage daughters with his wife and sailing partner, Wieke Beenen.

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