Government tackling cryptocurrency challenge, says finance minister
The government has established a crypto assets regulatory working group to investigate all aspects of cryptocurrencies and related blockchain concepts.
This is with a view to developing a cohesive governmental response to cryptocurrencies and a unified intergovernmental regulatory framework, finance minister Tito Mboweni said in a written reply to a parliamentary question by Freedom Front Plus MP Wouter Wessels.
The minister said the working group includes representatives from the Financial Intelligence Centre, Financial Sector Conduct Authority, Treasury, the Reserve Bank and the SA Revenue Service (Sars).
“It is anticipated that, following broad industry comment and participation, the crypto assets regulatory working group will be ready to release a final research paper on the subject during the course of 2019,” Mboweni said.
He noted that Sars is unable to accurately trace the number of declarations pertaining to capital profits on cryptocurrencies as the existing income tax return forms do not make provision for taxpayers to specifically declare capital profits regarding cryptocurrency trades.
“However, work is under way within Sars to consider the amendment of the tax forms for the 2019 tax season in order to cater for the description of other assets (which will include cryptocurrencies) by means of a specific description field on the form.
“Taxpayers who have made some form of declarations regarding cryptocurrency trades have captured such trade as a form of ‘other trade income’ or ‘other trade loss’, and have made reference to a description of digital/crypto currency trading (e.g. Bitcoin Cash, Litecoin (LTC), Ethereum (ETH), Zcash (ZEC) to name a few).”
Sars applies normal income tax rules to cryptocurrencies.
The Taxation Laws Amendment Bill of 2018 included proposed amendments to the treatment of cryptocurrencies for income tax and VAT purposes.
Mboweni said these amendments would ensure that losses on cryptocurrencies may only be offset against profits from cryptocurrencies (otherwise known as ring-fencing). He said the amendments would also clarify that cryptocurrencies cannot be classed as personal-use assets for capital gains tax purposes and would treat cryptocurrencies as financial services for VAT purposes.