Bitcoin and Tax revision South Africa
Bitcoin is a virtual crypto-currency that exists entirely in electronic form. Bitcoin was first launched in 2009 by Satoshi Nakamoto, which is an alias for a programmer or group of programmers. Bitcoin is defined as a digital, decentralized, partially anonymous currency and is not backed by any government or other legal entity, and not redeemable for gold or any other commodity.
Bitcoin is the revolutionary and combative crypto-currency that has seen its ups and downs over the years. What was initially said to be a “crazy idea” has now established its place in the market as a credible financial instrument.
There’s only a limited amount of Bitcoins available. When Bitcoin was first launched, a total of 21 million Bitcoins were available. But, that amount is halved every four years, meaning we’ll run out of Bitcoins by the year 2140. Nobody knows exactly why the creator of Bitcoin, decided on a limit of 21 million coins. The reason for the decrease in coins has to do with the way Bitcoin’s unique algorithm works. It’s designed to only supply 21 million coins in total before it essentially runs out of data.
Bitcoin Tax South Africa
Currently, Bitcoin itself is not taxable in South Africa.
The South African Revenue Service said transactions or speculation in Bitcoin are subject to the general principles of South African tax law and are taxed respectively. This applies to income generated from trading crypto-currency.
SARS did not specify the tax requirements for specific Bitcoin-to-rand transactions and said it does not accept payment in Bitcoin.
When exchanging Bitcoin for rand, the same taxes apply as any other disposable assets which may cause capital gain or could qualify as income for active traders. All assets are treated fairly in terms of tax.
The South African regulator is one of the more progressive in the world when it comes to blockchain technology.
If you’re actively trading Bitcoin, buying low and selling high then it is actually a stock and you’ll be taxed on it as trading profits or losses. Nonetheless, if you purchase Bitcoin to transact in, then it will be a capital item, and any gains or losses will be taxed as a capital gain or loss.
Your intention plays a vital role here!
For the South African Reserve Bank about Bitcoin tax and regulation in South Africa, it is best to refer to its position paper published in 2014. The SARB’s paper on virtual currencies can be found here.