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Delivering Package
Delivering Package
Writer's pictureCA Saloni Chanday

BINDING RULINGS: INCOME TAX – SALARY AND WAGES PAID IN CRYPTO-ASSETS : PUBLIC RULING BR PUB 21/01

The period or tax year for which this Ruling applies: This Ruling will apply from 1 March 2021 until 1 December 2022. This Ruling is signed by Susan Price on 11th January 2021.
Susan Price 
Group Leader  
Public Advice and Guidance  
Tax Counsel Office

The Arrangement to which this Ruling applies

The Arrangement is the payment of remuneration to an employee in crypto-assets in circumstances where the crypto-asset payments:

  • are for services performed by the employee under an employment agreement;

  • are for a fixed amount; and

  • are part of the employee’s remuneration package.

This Ruling applies only to salary and wage earners, not self-employed taxpayers; and where the crypto-assets being paid:

  • are not subject to a “lock-up” period;

  • can be converted directly into a fiat currency (on an exchange); and either:

  1. a significant purpose of the crypto-asset is to function like a currency; or

  2. the value of the crypto-asset is pegged to one or more fiat currencies.

This Ruling does not apply where the crypto-asset provided is a “share” for income tax purposes and is received under an “employee share scheme” as defined in s CE 7.


How the Taxation Law applies to the Arrangement

The Taxation Law applies to the Arrangement as follows:

  • The crypto-asset payments are “PAYE income payments” under s RD 3 and are subject to the PAYE rules.

Summary & Conclusion

  1. This Ruling amends and replaces a previous Ruling (BR PUB 19/01) which considered the income tax treatment of crypto-assets received by employees as part of their regular remuneration. The income tax treatment in that Ruling is still correct. However, the Commissioner is aware that some aspects of the arrangement ruled on and its commentary may be inconsistent with employment law (including, relevantly, the Wages Protection Act 1983 and the Minimum Wage Act 1983).

  2. The commentary discusses when crypto-assets will be treated as part of an employee’s salary or wages (for tax purposes) and, therefore, be subject to PAYE. It also discusses the implications arising from crypto-asset payments being subject to PAYE (such as potentially affecting an employee’s student loan repayments, Kiwisaver, and Working for Families entitlements). Payments of crypto-assets not subject to PAYE will be fringe benefits and subject to FBT.

  3. It is unclear on the face of the legislation whether an employee who regularly receives crypto-assets as a part of their normal remuneration package is subject to PAYE or whether FBT applies. Both views are arguable.

  4. Broadly, the scheme of the Act is that consideration in money is subject to PAYE, whereas non-monetary benefits are subject to FBT. Crypto-assets are not money in the technical sense (although they share some of the characteristics of money). This might suggest that payments in crypto-assets should be subject to FBT. However, the distinction between monetary and non-monetary payments is not hard and fast. Statutory exceptions make some non-monetary benefits (such as employer-provided accommodation) subject to PAYE. Further, the PAYE rules are drafted widely enough to potentially include some other non-monetary payments.

  5. Ultimately, the issue turns on whether regular payments in crypto-assets come within the ordinary meaning of “salary or wages” for tax purposes. The answer to this is not certain. While a regular payment received in crypto-assets has many of the hallmarks of salary and wages, historically salary and wages have been payments in money. However, s 6 of the Interpretation Act 1999 requires legislation to be interpreted as applying to modern circumstances. While not free from doubt, on balance, the Commissioner’s view is that for tax purposes, the concepts of “salary” and “wages” are wide enough to encompass some regular payments in crypto-assets (although employers will need to be aware of employment legislation). Consequently, these payments are “salary or wages” under s RD 5 for tax purposes. Therefore, they are “PAYE income payments” under s RD 3 and the PAYE rules apply to them.

  6. Because the payments are subject to PAYE, the FBT rules will not apply.


#Source: IRD


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