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Before receiving your salary in crypto you should consider these things

Carbert Waite LLP | Kevin Stenner and Mihai Beschea | Mar 30, 2022

crypto salary and taxes - Before receiving your salary in crypto you should consider these thingsIf you have been following the word of sports, you have likely heard of many brand-name athletes taking a portion of their salary in a crypto currency. Another interesting recent example is the major of New York City, Eric Adams, who recently announced he would receive compensation in cryptocurrency. Although this type of compensation agreement is still unique and new in the workplace, it is becoming more mainstream and carries with it several advantages over fiat currency BUT you should consider these things first:

Minimum Wage and Cryptocurrency

First, in Alberta “an employer must pay an employee at a wage rate that is at least the minimum wage established by regulation.”This minimum wage is currently $15 per hour in Alberta.  The problem is with the volatility. If the price of the crypto suddenly fell, there is a real risk that this will have caused the employer to have paid the employee less than minimum wage. This would put the employer off-side employment standards legislation and open them up to unnecessary risk.

See:  Crypto Payments Report 2022: How digital currencies are revolutionizing commerce, corporates and culture

Crypto Earnings Must Be Paid in Canadian Dollars

Second, employers in Alberta must pay employees in Canadian dollars such as cash, cheque or bill of exchange.  Since discretionary bonuses are not wages and so do not have to be paid in Canadian dollars. Accordingly, an employee can be paid a certain amount in Canadian dollars with a discretionary bonus paid in crypto.  From an employee perspective, taking a portion of your salary in cryptocurrency, such as a bonus, may be the safest way to transition into this pay scheme.

Crypto Earnings Tax and Deductions

Third, just because an employee is being paid a portion of their compensation in crypto, neither they nor the employer are exempt from paying tax on that amount in Canadian dollars.  Employers will still be responsible for all source deductions in Canadian dollars and employees will still be responsible for reporting employment income in Canadian dollars.

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CNBC | Goh Chiew Tong | Apr 11, 2022

Want to be paid in crypto? Here are the rewards — and the risks

There’s no denying that with the Great Resignation, workers are more empowered to seek what they want from their jobs.  Other than flexibility and better benefits, a new workplace perk is gaining popularity — the option of being paid in digital currency.

crypto tax and rewards - Before receiving your salary in crypto you should consider these thingsAccording to a global poll by financial consultancy deVere Group, cryptocurrencies could become more commonplace in salary negotiations with younger workers.

More than a third of millennials (those aged between 26 and 42) and half of Generation Z (25 and below) would be happy to receive half their salary in bitcoin or other forms of cryptocurrencies, revealed the study.

See:  Crypto-tax primer in Canada

Another survey, by SoFi at Work and Workplace Intelligence of 800 U.S. employees, showed that 42% of them would like to receive non-fungible tokens as performance rewards.

“Offering to pay your employees with Bitcoin can be a way to attract what we might call ‘future-thinking workers’, especially if you’re in certain industries, like FinTech,” he added.

In addition to the benefit of 'speedy payments' be careful for crypto price volatility (double-edged sword) and heightened cyber-risks.

When it comes to cryptocurrency tax laws, the country you’re working in matters. Some countries are “very lenient” in that regard, said Jarvis.  For instance, Portugal is known as a crypto tax haven for its 0% tax on bitcoin.  “When you consider how much these assets are increasing over time, they are significant gains to be made if you’re saving on that tax side of the equation,” Jarvis added.

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NCFA Jan 2018 resize - Before receiving your salary in crypto you should consider these thingsThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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