Cryptocurrency remuneration provides a wide range of benefits. For many remote workers who reside in countries with an aging banking system or high inflation, taking their salary in cryptocurrency before converting it to local currency is preferable to receiving their paycheck through traditional means. Not only is cryptocurrency payment often cheaper and faster than traditional bank channels such as SWIFT, but it also has the added benefit of neatly side-stepping the bank fees and hassle of currency conversion that often comes with international payments. However, remuneration through cryptocurrency is by no means limited to salary payout.

We expect that companies will soon begin to treat cryptocurrency in a similar manner to company stock and equity plans. The tokenization of company shares through NFTs or tokens would be a favorable option for both employees and employers. Employees would greatly appreciate the modernity of their company as well as the possibility to explore digital currency. Meanwhile, from a legal standpoint employers could keep 100% of their market share and avoid the hassle that comes with voting rights and other shareholder requirements, while still being held liable for remuneration based on share value.

Cryptocurrencies in the crosshairs of financial authorities

Due to rising visibility and interest in cryptocurrency, the financial authorities have begun to review their taxation laws regarding digital currency. While the legislation remains slightly behind, the financial authorities have begun paying closer attention to cryptocurrency and its implications. For example, the DAC8 initiative from the European Commission aims to identify the ultimate beneficial owner of cryptocurrency, demonstrating the government intent to map the blockchain and identify both transactions and people. From a Czech perspective, cryptocurrency communities are already active in the Czech Republic, and with the inevitable increase in cryptocurrency usage the Czech financial authority will also begin paying closer attention to cryptocurrency assets.

As financial authorities have begun collecting and tracking data for taxation purposes, it will be crucial for companies to understand cryptocurrency taxation implications. Companies offering cryptocurrency remuneration should be cognizant of the increased taxation risk it poses. Whether reflected through payroll or tax returns, steps should be taken to tax cryptocurrency remuneration through the appropriate employment taxation channels. From a consultant perspective, we expect to see an increase in cases of contested taxation related to cryptocurrency. If companies wish to pursue this enticing venue of remuneration, it will be vital to fully understand the shifting taxation implications.

Did you know…
From the legal perspective, cryptocurrencies are still not recognized as currencies under Czech law. It means that any payment executed to an employee in cryptocurrencies is considered a payout in kind (naturální mzda) with all implications (e.g., consent of the employee, limit on the amount of such payout).