The Inland Revenue Department (IRD), New Zealand’s tax office, has made it possible for Kiwis to receive salaries in crypto. Actually, it is the first country where salaries in digital currency are allowed. However, the coin should still be pegged to a fiat currency.
This step indicates recognition of the worldwide crypto market by the local government and gives way to more opportunities for workers. However, is this law so positive? Are there any drawbacks that should be taken into account? Our experts analyzed the law and made their own forecasts. Continue reading to learn more.
What is cryptocurrency?
Let’s start with the basics. Crypto is a decentralized digital currency that is created and monitored by encryption technologies without any government interference. It is one of the fastest and the most secure payment methods because data is safely encrypted, users remain anonymous, and transactions take place instantly. The only drawback is that crypto is highly volatile, so its owners can earn and lose thousands of dollars in a matter of minutes or even seconds.
Cryptocurrency is widely used in numerous industries: when shopping online, playing video games, or gambling. If owning some crypto, you can find profitable bitcoin promotions gathered by Casino HEX experts or send and receive money without paying any fees for transactions.
At the time of this writing, the Bitcoin value was $13,070 per Bitcoin. While countries across the world are trying to figure out how to approach crypto and whether to recognize it, New Zealand has already made a move towards the legalization of this digital currency.
Things to know about the recent law
In its official bulletin, The Inland Revenue Department has published new rules which allow employees to be paid in crypto until the payments are for contract-based services and have a fixed amount. Another requirement is that the salary in crypto should be pegged to fiat currency and be able to be exchanged.
According to the local tax laws, crypto salaries will be treated as pay-as-you-earn payments which are completed by an employer and then sent to tax departments. Under the current economic conditions, receiving a salary in crypto may be rather beneficial for those who are not living in a country that accepts the currency of their salary. In addition, crypto wages can eliminate cross-border expenses due to the absence of fees and conversion rates.
Challenges of this decision
Even though the decision may seem rather positive, it may cause lots of inconveniences in real life. First of all, salaries in cryptocurrency may only be paid to officially working employees. This means that freelancers are excluded and self-employed workers are not allowed to receive salaries in crypto.
In addition, payments should be pegged to a ‘real’ currency. They must also be converted into a chosen fiat currency on an official exchange. In addition, the salary needs to be paid in any asset that is officially considered a currency.
The process may also be quite complex. At first, the employer’s request to receive a salary in crypto should be indicated in an employment agreement and fixed to a particular regular sum. Then, it must be documented that the sum is pegged to and convertible into a fiat currency.
Finally, crypto may be subjected to a freezing period which means that the sum may not be traded or sent during a particular period of time. When reading the IR bulletin, it is obvious that they don’t consider cryptocurrency as money in a common-sense because these coins are not issued by governments and are illegal.
The future is here
New Zealand was the first to recognize cryptocurrency and allow salaries in Bitcoin. This decision is a real breakthrough for market enthusiasts and can be a great starting point for new trends and shifts on the market.
However, there are still a few restrictions and Kiwis may experience numerous limitations if deciding to receive a salary in crypto. And we shouldn’t forget how volatile and fast-changing the world of cryptocurrency is. We hope that after reading the article and analyzing all the pros and cons, you’ll be able to decide whether cryptocurrency is the right option for you.
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