New Zealand Releases Guidance on Taxation of Cryptocurrency

Official guidance regarding the tax treatment of payments in cryptocurrency to New Zealand employees takes effect Sept. 1, the country’s Inland Revenue Service said.

Under the guidance (Public Ruling BR Pub 19/01), which is effective Sept. 1, payments made to employees in cryptocurrency are to be subject to income tax withholding if they are paid in a currency that is directly convertible to or pegged to a standard fiat currency and if they are not subject to a period where an employee cannot convert or sell the cryptocurrency.

If the arrangement to pay an employee in cryptocurrency does not denominate the payment in terms of New Zealand dollars – for example, stating that the employee is to be paid 1,000 New Zealand dollars per week in cryptocurrency – the value of the payment must be converted into New Zealand dollars as of the date the payment was made to the employee, said the guidance, which was issued June 27.

Payments in cryptocurrency that do not fulfill the requirements to be subject to income tax withholding are to be subject to Fringe Benefit Tax, the guidance said.

A second piece of guidance (Public Ruling BR Pub 19/02) released by the Inland Revenue Service applies the same treatment to bonus payments made in cryptocurrency, also effective Sept. 1. However, this guidance does not apply to cryptocurrency payments received as a share from an employee share plan, it said.

Among the countries that already consider payments to employees in cryptocurrency to be wage payments subject to income tax withholding are Australia and Singapore.