Normal tax rules for cryptocurrencies says SARS
The onus is on taxpayers to declare all cryptocurrency-related taxable income in the tax year in which it is received or accrued.
THE South African Revenue Service (SARS) will continue to apply normal income tax rules to cryptocurrencies and will expect affected taxpayers to declare cryptocurrency gains or losses as part of their taxable income.
The onus is on taxpayers to declare all cryptocurrency-related taxable income in the tax year in which it is received or accrued. Failure to do so could result in interest and penalties.
Taxpayers who are uncertain about specific transactions involving cryptocurrencies can get guidance from SARS through channels such as Binding Private Rulings (depending on the nature of the transaction).
Cryptocurrency (typified by Bitcoin) is an internet-based digital currency that exists almost wholly in the virtual realm. A growing number of proponents support its use as an alternative currency that can pay for goods and services much like conventional currencies.
Read also: 600 bitcoin computers nabbed in Iceland heists
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.
Following normal income tax rules, income received or accrued from cryptocurrency transactions can be taxed on revenue account under “gross income”.
Taxpayers are also entitled to 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.
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