SARS is in discussions with tech companies to track Bitcoin trades. | iCE3X
There are new tax regulations set in place by SARS (The South African Revenue Service) and the SARB (the South African Reserve Bank). Over the years, many South Africans have seen great benefits from the volatility that comes with cryptocurrency. In many cases, these people have doubled or even tripled their initial investment. Despite the success people have been having with crypto, converting bitcoin to rand is about to get slightly more difficult.
SARS recently announced that normal income tax rules are going to apply to cryptocurrencies. This will result in taxpayers having to declare their profits and losses as part of their taxable income.
SARS on How the Crypto Tax will work
Now that taxpayers have to keep track of all transactions they make with bitcoin, people are becoming frustrated. Ettiene Retief, Chairman of the National Tax and SARS committee at SAIPA, stated
The facts in regards to the nature of the transactions will determine whether capital gains tax or income tax will apply. Typically, a person who trades regularly with cryptocurrenceis may be subject to normal income tax. In some cases, there may be limitations or even ring-fencing that may apply in regards to losses
This mainly applies to day traders and short-term investors, but capital gains tax could potentially apply in the case of long-term investments. Retief added:
Where a person purchases and holds a cryptocurrency for an extended period of time aimed at investing or capital growth, the profits or losses may be subject to capital gains tax as opposed to normal income tax
It’s not all bad though. It’s entirely possible to declare your losses to SARS and receive tax benefits in both scenarios. any losses claimed on short-term investments and cryptocurrency investments have the potential to be limited depending on specific factors relating to the taxpayer. SARS did not specify the exact tax requirement for specific bitcoin to Rand payments, and also stated that they will not be accepting payments in bitcoin.
The South African Reserve Bank published a position paper in 2014 regarding the taxation of virtual currencies.
Can I Use Bitcoin Without Rand?
Cashing your bitcoin in Rand is fairly easy to track. Though this may not be a problem for some people, it is not your only option. Luckily, there are ways to use the cryptocurrency making it harder to trace.
You can do this by using a cryptocurrency-based wallet and debit card. There are multiple cryptocurrency wallets and debit cards that are used to purchase everyday items all over the world.
TenX, a cryptocurrency wallet, and card service tested in over 50 countries is a good option. Their cryptocurrency wallet is available on iOS, Android and also online an online web wallet. TenX allows their users to spend their cryptocurrency without a bank account, much like you would spend normal fiat currencies.
— MasterNodes.pro (@MasterNodesPro) August 22, 2018
What Does This Mean for Cryptocurrency in SA?
South African citizens are required to pay income tax on cryptocurrency, even though it is not classed as legal tender. If you are in South Africa accepting bitcoin as a payment option, you subsequently will need to declare it as a taxable income. South African miners are going to have a hard time seeing profits now that they have to pay taxes for the bitcoins they earn.
Amidst all of the new regulations regarding cryptocurrencies, the VAT status of bitcoin is unclear. SARS stated:
The 2018 annual budget review will review the VAT treatment of crypto-currencies. Pending policy clarity in this regard, SARS will not require VAT registration as a vendor for purposes of the supply of cryptocurrencies.
Right now, cryptocurrency is in a grey area, but if you’re familiar with cryptocurrencies this is no surprise. Investing in bitcoin today won’t put you in any greater of a risk than it is already. The best thing you can do is stay informed and up to date in the realm of cryptocurrency. Invest wisely and you can turn a profit in almost any market environment. If you’re going to be converting your bitcoin to rand, make sure you go through all the right channels, you wouldn’t want to have outstanding tax payments due.
If you’re looking at converting your bitcoin to rand use a reputable crypto exchange where you can achieve the highest price.
Share your feelings in regard to the government’s position regarding tax on cryptocurrency?