The South African Revenue Service (SARS) has stated that it will continue to "apply normal income tax rules to cryptocurrencies." This means that if you hold cryptocurrency such as Bitcoin or Ethereum and realize income or a profit/loss from it, SARS requires you to declare this as part of your taxable income in South Africa.
Given that in South Africa, and as SARS further emphasized, the obligation is on the taxpayers to declare all taxable income, including cryptocurrency-related income, failure to declare could result in interest and penalties.
"In South Africa, the word “currency” is not defined in the Income Tax Act (the Act). Cryptocurrencies are neither official South African tender nor widely used and accepted in South Africa as a medium of payment or exchange. As such, cryptocurrencies are not regarded by SARS as a currency for income tax purposes or Capital Gains Tax (CGT). Instead, cryptocurrencies are regarded by SARS as assets of an intangible nature," explained SARS in a statement released during the first week of April 2018.
Given that, as SARS continues to elaborate, income received or accrued from cryptocurrency transactions can be taxed under “gross income”.
The announcement follows the South African Reserve Bank's announcement earlier in 2018 that it is setting up a unit to advice on financial technology including cryptocurrencies. That announcement has gone on to illustrate the positive, yet cautious, stance that South African policy makers have taken towards FinTech and cryptocurrencies. A different view compared to the likes of Namibia, Kenya and Nigeria where cryptocurrencies have been effectively banned.
What is also positive about the SARS announcement is that South African taxpayers can claim expenses associated with cryptocurrency accruals or receipts, "provided such expenditure is incurred in the production of the taxpayer’s income and for purposes of trade." This is likely going to put at ease both consumers and merchants who use cryptocurrencies in their day to day business.Share this article via: