Can your salary be paid out in cryptocurrency?
Whether salary can be paid out in cryptocurrency, either partially or in full, is a question that is becoming more and more popular. Crypto and blockchain start-ups are often more in favour of paying employees in crypto than more traditional companies. As exchange rates can eat into your earnings and bank transfers can sometimes take days to clear, getting paid in crypto means you are getting paid in something that is fast and easy to use.
Unfortunately, there are also some downsides. High volatility is certainly one of them. Unless your cryptos are almost immediately converted into fiat currency, their value could drop drastically in a matter of hours or sometimes even minutes. Although digital currency is more and more accepted, there is still a long way to go before it can be considered a standard means of payment. Also, providing a (partial) crypto salary is still a complicated matter for payroll specialists. As a result, many companies remain uninterested for now. Another important question is whether it is currently even legally possible in Belgium to receive your salary in crypto.
The Salary Protection Act of 12 April 1965 requires salary to be paid out in euro or in a currency that is normally used or legally accepted in Belgium. If the employee works abroad, the salary must be paid, fully or partly, in euro or in a currency legally accepted in the country where the work is performed. Since cryptocurrency is not an officially accepted legal currency at this time, an employee’s salary cannot be paid out in crypto. Besides possible criminal prosecution, the employer could even end up having to pay the salary twice.
Although the monthly base salary cannot be paid out in a cryptocurrency, it should be possible to pay it out as an additional benefit in kind on top of the standard salary. However, even this position could be challenged by the authorities, as only the benefits mentioned in an exhaustive list in the Salary Protection Act can be paid ‘in kind’, and crypto is currently not included.
This restriction only applies to employees and not to self-employed individuals; the latter could therefore be (partially) paid out in cryptocurrency. In other words, as a freelancer, independent contractor, or even a self-employed company director, you can perfectly choose to receive crypto instead of a fiat-denominated remuneration.
In the absence of any specific regulation, there should be no difference in the tax treatment of fees paid in crypto compared to the traditional ways of remuneration. The gross amount paid out will be subject to social security contributions. The net earnings will then be taxed at the standard progressive tax rates of 25% up to 50% (plus a communal surcharge), as it will always qualify as professional income in this context. This would, for example, require you to meticulously keep track of the value of the cryptocurrency the day you got paid in it.
TAXPATRIA® can advise you on the income tax and social security implications of being paid in digital currency, as well as the accounting or payroll challenges that it entails.