• Loading ticker data...
Coin Prices →
Blockchain News

The South African Revenue Service clarifies its stance on cryptocurrencies

The South African Revenue Service has announced that it will now apply “normal income tax rules” to cryptocurrencies.

Written by Bryan Smith Published on

Shortly after the South African Reserve Bank announced a new  FinTech programme which will seek to evaluate assess the impact – and potential regulatory requirements – cryptocurrencies, the South African Revenue Service has outlined that it will continue to apply “normal” income tax rules to cryptocurrencies.

The news will mean that taxpayers will need to declare their according gains or losses as part of their taxable income.

In an official statement, the Revenue Service has accordingly defined cryptocurrencies – stating that “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.”

Accordingly, the Service has deemed that “…whilst not constituting cash, cryptocurrencies can be valued to ascertain an amount received or accrued as envisaged in the definition of ‘gross income’ in the Act.”

Further, the proclamation outlined that “Following normal income tax rules, income received or accrued from cryptocurrency transactions can be taxed on revenue account under ‘gross income’. Alternatively, such gains may be regarded as capital in nature, as spelt out in the Eighth Schedule to the Act for taxation under the CGT paradigm”.

The Service has elected to make use of its existing frameworks to accordingly guide cryptocurrency investors on possible tax implications, and has accordingly stated that it does not deem a separate interpretation necessary at this point.

The Service has confirmed that taxpayers would be entitled to claim expenses associated with cryptocurrency accruals or receipts on the condition that expenses were incurred in the production of income.

The authority has offered that cost adjustments could be made by determining whether gains or losses had been made through mining (in which case cryptocurrencies, prior to their exchange, would be held as trading stocks), trade (which would be identified as a normal cash transaction), or as tender (which would accordingly be identified as a barter transaction).

SARS has officially outlined that the Value Added Tax (VAT) treatment of cryptocurrencies would be reviewed in the near future, and until such time as policy changes are made, the service will not require VAT registration as a vendor for the supply of cryptocurrencies.

The service has urged “taxpayers who are uncertain about specific transactions involving cryptocurrencies” to seek “guidance from SARS through channels such as Binding Private Rulings.”

The determination comes amidst wider interest in cryptocurrencies and distributed ledger technology in South Africa.

The South African Reserve Bank has outlined its intention to launch ‘Project Khoka’ – a new initiative which will experiment with distributed ledger technologies. The project will usher in a proof of concept, wherein interbank clearing and settlement through distributed ledger technology will be assessed.

The proof of concept will specifically trial wholesale payments leveraging Quorum, which is a private, permissioned version of the Ethereum network founded by JPMorgan.

More broadly, newly incumbent South African President Cyril Ramaphosa proposed the concept of a singular African currency which, according to the statesman, could take the form of a ‘digital’ currency.

Written by

South African technology journalist, podcaster, photographer and filmmaker. Hodling - BTC, NEO, ETH.@bryansmithsa

Related Articles