Though not legal tender, you have to pay tax on bitcoin, says SARS
The South African Revenue Service (SARS) has warned taxpayers that they could be penalised if they do not declare cryptocurrency gains and losses.
The revenue service said it deemed cryptocurrencies – such as bitcoin and ethereum – as intangible assets, rather than “a currency for income tax purposes or capital gains tax”.
The onus was on taxpayers to declare all cryptocurrency-related taxable income in the tax year in which it is received or accrued, SARS said in a statement. Failure to do so could result in interest and penalties, it said.
SARS spokesman Sandile Memela said in 2017 that the revenue service was in discussions with global peers and at the time was exploring options.
Regulators in most countries around the world have been grappling with how to tax and manage the cryptocurrency market, which has pulled back in recent months following a spectacular rise in value in 2017.
For example, Chinese authorities have sought to clamp down on cryptocurrency through strict regulations and freezing bank accounts associated with exchanges.
In the US, the federal government does not regulate cryptocurrencies, but in the EU and UK strict regulations demand transparency of information and shared data between markets and institutions.
In its statement, SARS said taxes could be applicable to cryptocurrency mining, trades on cryptocurrency exchanges, and the purchase of goods and services using digital money.
Meanwhile, taxpayers were entitled to claim expenses associated with cryptocurrency accruals or receipts, provided that this expenditure related to the taxpayer’s income generation “and for purposes of trade”.
The government is still considering how value-added tax (VAT) will apply to cryptocurrencies. “Pending policy clarity in this regard, SARS will not require VAT registration as a vendor for purposes of the supply of cryptocurrencies,” the revenue service said.
The South African Reserve Bank is working with the National Treasury, the Financial Services Board and the Financial Intelligence Centre to evaluate potential regulatory frameworks for cryptocurrencies.
The Reserve Bank’s new fintech unit is due to review the monetary authority’s position on privately issued cryptocurrencies. It would look at clearing and settlement risks, exchange control implications, cybersecurity considerations and the implications for monetary policy and financial stability.
With Sunita Menon