Withholding Tax on Salary or Bonus Paid in Cryptocurrency: An Employer's Guide

When an employer pays part of an employee’s salary or a bonus in Bitcoin, a stablecoin, or another cryptocurrency, that payment is still taxable compensation — valued in pesos at its fair market value on the date paid — and the employer must still withhold and remit the corresponding tax to the BIR in peso cash. No BIR issuance specifically addresses crypto-denominated wages, so this treatment rests on the general in-kind compensation rule under Revenue Regulations (RR) No. 2-98, applied by the same logic the BIR already uses for stock, property, and other non-cash pay.

This is a distinct question from how the BIR taxes an individual’s own crypto trading gains, covered in How Is Cryptocurrency Taxed by the BIR in the Philippines? — that post addresses a trader or investor disposing of crypto they already own. This post addresses the employer side: a tech or crypto-industry business that pays wages, a bonus, or part of compensation to its own employee in crypto instead of, or alongside, pesos, and what that employer’s withholding obligation looks like.

Is compensation paid in crypto still “compensation” for withholding tax purposes? #

Yes — the NIRC and its implementing regulations define taxable compensation by what it is paid for, not by what it is paid in, so cryptocurrency paid for services rendered is compensation income exactly the same as a peso salary. NIRC Section 32(A) defines gross income to include “compensation for services in whatever form paid,” and Section 78(A) defines “wages” for withholding purposes as remuneration for services performed by an employee, without limiting the medium of payment to cash.

RR No. 2-98, Section 2.78.1(A) makes the in-kind rule explicit for compensation paid other than in money:

“If services are paid for in a medium other than money, the fair market value of the thing taken in payment is the amount to be included as compensation subject to withholding.”

That clause was written with stock, bonds, and other property in mind — the regulation does not mention cryptocurrency by name, because it predates the asset class by more than two decades. There is no BIR-issued regulation or circular that specifically addresses crypto-denominated wages. Applying Section 2.78.1(A)’s medium-other-than-money principle to a fungible digital asset like a Bitcoin or stablecoin payment is this site’s reasoned extension of an existing, general rule — not a citation to a crypto-specific ruling, because one could not be verified to exist. Employers relying on this position for a live filing should treat it as the conservative, defensible reading of current regulations, and can confirm it with a BIR ruling request if the arrangement is material.

Step by step: valuing and withholding on a crypto compensation payment #

An employer paying part of an employee’s compensation in crypto follows the same sequence as any in-kind payment: determine the peso fair market value on the payment date, compute withholding tax on that peso-equivalent amount, and remit the tax in peso cash regardless of what the employee received. The steps:

1. Identify the payment date. This is the date the cryptocurrency is transferred to, or otherwise made available to, the employee’s wallet — the date of actual or constructive receipt, the same trigger point used for any other compensation.
2. Determine the peso fair market value on that date. Use a documented, consistently applied rate — for example, the prevailing or closing PHP conversion rate quoted by a recognized exchange at the time of transfer. The BIR has not prescribed a specific valuation source for crypto, so consistency and a retained record of the rate used are what an employer can defend on audit.
3. Treat that peso-equivalent figure as compensation income. Add it to the employee’s regular or supplementary compensation for the period (a crypto bonus, for instance, is supplementary compensation, taxed the same way a cash bonus of the same peso value would be).
4. Compute withholding tax on the peso-equivalent amount using the applicable withholding tax table for compensation, exactly as for a peso payment — see Withholding Tax Table on Compensation: How the Computation Works for the mechanics.
5. Fund and remit the computed tax in peso cash through BIR Form 1601-C monthly, since the BIR does not accept tax payment in cryptocurrency. In practice this usually means the employer needs a peso-cash component in the arrangement — either withholding the tax from a separate peso portion of the pay package, or converting enough of the crypto to pesos itself to cover the remittance.
6. Reflect the peso-equivalent gross compensation and the tax withheld in the employee’s BIR Form 2316 at year-end, alongside any peso-denominated pay, so the annualized computation and substituted filing (where applicable) reconcile correctly. See How to Fill Out BIR Form 2316 for the underlying form mechanics.

Why the employer can’t just remit the tax in crypto #

The BIR’s tax collection system is built around peso remittance through eFPS and eBIRForms-linked bank or electronic payment channels — there is no BIR-accepted mechanism to remit withholding tax, or any other tax liability, directly in cryptocurrency. This creates a practical funding gap that doesn’t exist with an ordinary peso payroll: the employer has paid the employee in an asset the BIR won’t accept as tax payment, so it must separately source pesos to cover the withholding.

Employers structuring a crypto compensation arrangement typically handle this funding gap one of two ways:

• Split the payment so a peso-cash portion of the compensation is large enough to cover the withholding tax on the full amount (crypto plus cash), with the tax withheld from the cash portion.
• Convert a slice of the crypto to pesos at the time of payment specifically to fund the remittance, documenting the conversion rate and amount alongside the compensation records.

Either way, the withholding obligation is not reduced or waived because part of the pay package is illiquid or non-peso — the employer remains the withholding agent and remains liable for the tax whether or not it built in a funding mechanism.

Worked example: a ₱50,000 bonus paid in a stablecoin #

Bitwise Solutions PH, Inc., a software company, decides to reward a senior developer with a year-end performance bonus paid in USDT (a US-dollar-pegged stablecoin) instead of pesos. The company sets the bonus at a peso-equivalent value of ₱50,000 and transfers the corresponding amount of USDT to the employee’s wallet on December 15, using that day’s prevailing USDT/PHP conversion rate from the exchange it uses to source the tokens.

Because Bitwise Solutions cannot pay the BIR in USDT, it has two options for the ₱15,000 withholding tax: (a) withhold it by transferring only ₱35,000-equivalent in USDT to the employee and funding the ₱15,000 remittance from company peso cash, or (b) transfer the full ₱50,000-equivalent in USDT and separately absorb the ₱15,000 as an additional employer cost, grossing up the benefit. Either way, Bitwise Solutions remits ₱15,000 in peso cash through BIR Form 1601-C for that month, and reports the full ₱50,000 peso-equivalent bonus — not just the net USDT transferred — as the employee’s taxable compensation on BIR Form 2316. If USDT’s PHP conversion rate shifts between the transfer date and any later date the company checks its books, that later movement doesn’t change the withholding tax base — the figure is fixed at the fair market value on December 15, the date of payment, not on any earlier or later date.

Frequently asked questions #

Is a bonus paid in Bitcoin or a stablecoin taxable compensation in the Philippines? #

Yes. Compensation for services is taxable regardless of the medium the employer uses to pay it. Under Revenue Regulations No. 2-98, Section 2.78.1(A), compensation paid in a medium other than money — such as property, or by extension a digital asset like cryptocurrency — is valued at its fair market value on the date paid and taxed as ordinary compensation income, the same as a peso salary or bonus.

What exchange rate does an employer use to value a crypto salary payment? #

The employer should use the cryptocurrency’s fair market value in Philippine pesos at the time the compensation is actually paid or constructively received by the employee — for example, the closing or prevailing exchange rate quoted by a recognized exchange on the payment date. There is no BIR-specified crypto valuation source, so the employer should use a consistent, documented, reputable rate source and keep a record of the rate used for each payment.

Can an employer remit withholding tax to the BIR in cryptocurrency instead of pesos? #

No. The BIR does not accept cryptocurrency as payment for any tax liability, including withholding tax on compensation. Even when the underlying compensation is paid in crypto, the employer as withholding agent must fund and remit the corresponding withholding tax in peso cash through the regular eFPS/eBIRForms channels.

Does paying salary in crypto instead of pesos let an employer skip withholding tax? #

No. The obligation to withhold tax on compensation attaches to the compensation itself, not to the currency or medium used to pay it. An employer that pays wages or a bonus in cryptocurrency without withholding and remitting the corresponding tax is still liable for the tax, plus surcharge, interest, and compromise penalties for failure to withhold and remit.

Is paying employees in cryptocurrency itself illegal or restricted in the Philippines? #

This article addresses only the BIR withholding tax treatment of crypto-based compensation, not labor law. Separately from tax rules, Philippine labor law generally requires wages to be paid in legal tender, which is a distinct compliance question from the BIR withholding issue this article covers — employers considering crypto-based pay should also confirm compliance with labor regulations before designing such an arrangement.

Summary #

Paying an employee’s salary or bonus in cryptocurrency does not create a tax-free payment or excuse the employer from withholding — it only changes how the taxable amount is measured. Under the in-kind compensation rule in RR No. 2-98, Section 2.78.1(A), the peso fair market value of the crypto on the date it’s paid becomes the compensation figure the employer runs through the ordinary withholding tax computation, reports on BIR Form 2316, and remits to the BIR in peso cash — because the BIR does not accept tax payment in cryptocurrency, no matter what the underlying compensation was paid in. Employers considering this kind of arrangement should build in a peso-funding mechanism for the withholding tax from the start, document the valuation rate used for every payment, and treat this as a reasoned application of general in-kind compensation rules rather than a settled crypto-specific ruling, since none currently exists. For the individual employee’s side of digital-asset taxation once crypto leaves the employer’s hands, see How Is Cryptocurrency Taxed by the BIR in the Philippines?, and for how non-cash pay is treated when it takes the form of equity instead of a digital asset, see How the BIR Taxes Employee Stock Options.