Several countries all over the world are stating to tax Bitcoin and other cryptocurrencies. South Africa is not outside this trend. The South African Revenue Service (SARS), has released its stance on taxing cryptocurrencies. According to it, normal income tax rules will apply to virtual currencies in general.
SARS Crypto Taxation
According to a statement released on April the 6th, SARS will continue to apply normal income tax rules to cryptocurrencies and will expect that cryptocurrency investors will declare gains or losses as part of their taxable income.
Cryptocurrencies allowed investors of all kinds to exponentially increase their profits. Of course, regulations and restrictions did not follow up this trend in virtual currencies, and now, tax offices around the world are trying to catch the market up.
The media release reads as follows:
“Increased attentiveness and speculation regarding the future of cryptocurrencies has prompted calls for SARS to provide direction as to how cryptocurrencies should be treated for tax purposes. However, as indicated in this media statement, there is an existing tax framework that ca guide SARS and affected taxpayers on the tax implications of cryptocurrencies, making a separate interpretation Note unnecessary for now.”
It is important to understand that for South Africa, cryptocurrencies are neither official South African tender nor widely used and accepted in the country as a means of payment. That means that virtual currencies are not regulated by the SARS as a currency for income tax purposes or Capital Gains Tax (CGT).
About it, the statement explains:
“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.”
South Africa Increased Interest for Cryptocurrencies
South Africa has shown an increased interest for cryptocurrencies in the last years. Several Initial Coin Offerings (ICOs) are taking place in this country, and other crypto-related businesses have their offices in South Africa.
Indeed, the society has been affected by cryptocurrencies for a very long time, and activities related to blockchain and virtual currencies are invading the streets. At BitcoinHub we wrote some time ago that a father was trying to desperately defend his son that was involved in a confusing episode regarding cryptocurrencies.
The SARS is trying to regulate a market that is very conflictive, volatile, and attractive for investors. About the use of cryptocurrencies, the South African Revenue Service is working in order to bring clarity to a yet highly unregulated market.
“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. Following normal income tax rules, income received or accrued from cryptocurrency transactions can be taxed on revenue account under “gross income”.”