To fix the issue, open the file includes/User.class.php go to line 1673 to find
if(($width < 500 && $height < 500) || ($width/$height) != 1) return Main::redirect("user/splash/create",array("danger",e("Avatar must be either a 100x100 PNG or a JPEG (Max 300KB).")));
and replace that by
if(($width > 500 && $height > 500) || ($width/$height) != 1) return Main::redirect("user/splash/create",array("danger",e("Avatar must be either a 100x100 PNG or a JPEG (Max 300KB).")));