The South African Revenue Service, or SARS, has released an official statement in which it says normal tax rules apply to cryptocurrencies, meaning every South African who wishes to trade, or in any way deal with cryptos may have to pay an income tax.
Taxpayers are, naturally, required to clearly declare all of their losses and gains on the cryptocurrency market. Cryptocurrency earnings may be liable for capital gains tax (CGT) or may be treated under the country’s regular tax rules.
SARS has stated that the onus to declare crypto-related taxable income is on taxpayers, and that failure to report income from cryptocurrencies can and will result in penalties and interest.
The organization revealed it realizes that many people might not be aware of what they need to do to pay taxes for their crypto investments. As such, SARS is set to provide taxpayers guidance through various channels.
The decision, SARS noted, was influenced by growing interest in cryptocurrencies. The statement reads:
“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 can guide SARS and affected taxpayers on the tax implications of cryptocurrencies, making a separate Interpretation Note unnecessary for now.”
In South Africa, cryptocurrencies aren’t seen as legal tender and, as such, aren’t widely accepted as a payment method. This, SARS argued, means they are considered assets, with no tangible nature.
Since cryptocurrencies don’t have a physical form and can’t be used as cash, income received and accrued from cryptocurrencies transactions will be taxable under “gross income.”
On a positive side, SARS claims taxpayers are entitled to claim cryptocurrency-related expenses, “provided such expenditure is incurred in the production of the taxpayer’s income and for purpose of trade.” Additionally, it won’t require “VAT registration as a vendor for purposes of the supply of cryptocurrencies.
The organization revealed that in the 2018 budget review in February it’s set to further clarify the situation.