New Zealand tax authorities opened the doors for employers in New Zealand to pay their staff in cryptocurrencies. As it is stated in the official document, “This Ruling considers the income tax treatment of crypto-assets received by employees as part of their regular remuneration.”
New Zealand is certainly making an innovative decision on cryptocurrencies, while other countries are still trying to figure out what attitude they will take against cryptocurrencies.
Examples of New Zealand Taxation On Crypto
Below are some examples of how taxation will be done in three different cases.
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).
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