Crypto Tax Explained: How to Ensure Compliance
General information only. This article explains the law and SARS practice as they stood on the date shown above. It is not advice for your circumstances, and rates, thresholds and deadlines can change every year. Please speak to us before you act on it: info@booysengroup.co.za · +27 (0)12 740 7703.
There is still a lot of uncertainty surrounding the payment of crypto taxes to the South African Revenue Service (SARS). The entity has published guidelines relating to the matter and has provided the South African Reserve Bank (SARB) with a position paper that includes recommendations for the development of a regulatory framework for cryptocurrencies. This means that the SARB could be providing more clarity on the specifics surrounding crypto assets and the taxation thereof in the near future. Until such a time comes, each case will be judged on its own merit and it is important for taxpayers to understand the view that SARS currently holds of cryptocurrencies.
Which Tax Applies To Cryptocurrencies?
According to their website, SARS applies “normal income tax rules” to crypto assets. In short, what this means is that income generated from crypto assets will be classified as either personal income or capital gains and thus be taxed accordingly. Individuals that are actively trading crypto assets or regularly generating profit will most likely be liable for taxes on a sliding scale according to the provisions of personal income tax laws. If a taxpayer is able to prove that crypto assets are used for capital gains, Capital Gains Tax (CGT) would apply and the taxpayer would be eligible for a significant annual tax exclusion. Taxpayers will essentially have to prove to SARS that income is not generated continuously, but only at the moment of sale, in order for CGT to apply when considering crypto taxes.
How To Remain Compliant
In order to ensure that you don’t incur any penalties or fall into bad standing with SARS, it is advised that you declare all crypto-related income during the financial year. SARS makes provision on the Income Tax Return (ITR12) form for crypto assets where taxpayers are able to declare these separately. This allows the South African Revenue Service to investigate each case on its own merit in order to make a determination. It is clear that the entity has started to intensify its efforts to collect crypto taxes and anyone who trades in cryptocurrencies should take notice as more developments could unfold in the future.
Tax season is a turbulent time for most individuals and businesses. When faced with a relatively new concept such as crypto tax, it could become an increasingly stressful endeavour. Eliminate the uncertainty by entrusting your financial affairs to professionals! Booysen Accountants have a wealth of experience in the financial industry and regularly deal with the complexities surrounding crypto tax. Contact us on 012 740 7703, or email This email address is being protected from spambots. You need JavaScript enabled to view it. for more information on the range of services we provide.
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