The legality of cryptocurrency salaries

Many countries introduced tax rules governing the tax treatment of salaries paid in
cryptocurrencies. The Netherlands, New Zealand, and the UK are just some of those countries.
Cryptocurrencies supporters all over the world see the new rules as an official endorsement of
alternative monetary systems and an important step towards the global acceptance of

The rules on the tax treatment of cryptocurrency salaries vary from country to country. The Dutch
taxman sees cryptocurrency salaries in the same way as other payments in kind. From a tax point
of view, payments in cryptocurrencies do not differ from payments in gold, cows, or chocolate
bars. In the Netherlands, cryptocurrency salaries are taxable based on their value in euro at the
time when they are paid.

New Zealand followed the example of the Netherlands and adopted rules applying to
cryptocurrency salaries. The rules became effective on the 1st of September 2019. They apply only
to payments in regular and fixed amounts. Furthermore, the cryptocurrency used to make the
payments needs to be pegged to at least one regular currency and must be directly convertible into
a standard form of payment. The rule does not apply to self-employed taxpayers. Companies that
fall within the scope of the new rule are entitled to take into account their cryptocurrency payments
for tax purposes.

In 2014, the UK published guidance entitled “Paying employees in shares, commodities, or other
non-cash pay”. The guidance clearly states that employers who offer certain non-cash payments
to employees need to calculate and deduct applicable taxes on those payments. Such payments
include, but are not limited to, payments with crypto assets, stocks and shares, financial
instruments, and commodities.

Employers willing to pay their employees in cryptocurrencies need to be aware of the highly
volatile nature of cryptocurrencies. For example, Bitcoin was trading at USD 7,430 on the 24th of
October 2019, whereas its exchange rate in 2017 was about USD 19,000.

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