South Africa Proposes Draft for Cryptocurrency Tax

South Africa Proposes Draft for Cryptocurrency Tax

The South Africa Revenue Service (SARS) has put forward a suggestion to tax  income generated from cryptocurrency trading and operations, TechWeez reported on Wednesday.

The report said the proposal was first introduced in April when SARS announced its plans to tax digital currencies.

SARS said in a statement then:

"In South Africa, the word ‘currency' is not defined in the Income Tax 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 viewed by SARS as assets of an intangible nature.”

According to TechWeez, SARS submitted draft rules on how tax authorities should look at cryptocurrencies in the country. It added that the proposal was met positively by the South African cryptocurrency community because it signals government support for the space.

Under the draft, SARS would continue to consider digital currencies as intangible assets that are still subject to income tax. If passed into law, all South African holders or traders of cryptocurrency should declare any profits or losses they incur from trading the asset class as part of their taxable income.

In terms of Value-Added Tax (VAT), SARS said digital currency transactions are not charged with VAT because they are treated as an exempt financial service. The issuance, collection, selling, buying, acquisition or transfer of ownership of cryptocurrencies are not covered with VAT, it said.

The report quoted Natalie Napier, a partner at local legal firm Hogan Lovells as saying:

 “No VAT will be levied on any cryptocurrency, but SARS deems a cryptocurrency as assets of an intangible nature and therefore SARS will continue to apply normal income tax rules to cryptocurrencies. Affected taxpayers are obliged to declare cryptocurrency their capital or revenue gains or losses as part of their taxable income,”

In its April proposal, SARS said it would not create new tax rules for cryptocurrencies but wants crypto traders to declare their income or losses from the space as assets using existing laws.

Share your thoughts, add a comment!

You must be logged in in order to place a comment.

Article comments

No comments yet, be the first to comment this article