The New Zealand Commissioner of Inland Revenue has issued a pair of binding rulings (BR) under Section 91D of the Tax Administration Act of 1994 stating that the payment of remuneration to an employee in crypto-assets (e.g., Bitcoin) will be treated as part of the employee's salary or wages and is therefore subject to Pay as You Earn (PAYE) withholding.
BR Pub 19/01 provides that the payment of remuneration to an employee in crypto-assets as part of the employee's regular remuneration will be treated as part of the employee's salary or wages and is subject to PAYE. In BR Pub 19/02, the Commissioner ruled that the payment of incentives or bonuses in crypto-assets to an employee arising from employment is also subject to PAYE.
The rulings apply only 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 a significant purpose of the crypto-asset is to function like a currency or the value of the crypto-asset is pegged to one or more fiat currencies. Commentary to the rulings explains that a Fringe Benefits Tax (FBT) applies where it is determined that the payment is not assessable income subject to PAYE withholding. Payments of crypto-assets not subject to PAYE are fringe benefits subject to FBT.
BR Pubs 19/01 and 19/02 appear in the Inland Revenue Department’s Tax Information Bulletin for August (
Issue 7, Vol. 31, August 2019).
Edward Kowalski, Esq., is Manager of Payroll Information Resources for the American Payroll Association.