SARS to continue to apply normal income tax rules to crypto-currencies

Taxpayers will have to declare gains or losses from crypto-currencies

The South African Revenue Service (SARS) has issued a statement explaining that it will continue to apply normal income tax rules to crypto-currencies. For South Africans who own such currency (Bitcoin, being the most well known, but only one amongst many) this means having to declare gains or losses on their tax returns.

It might surprise some to learn that the Income Tax Act doesn’t regard crypto-currency as currency, but rather as ‘assets of intangible nature’. Since crypto-currencies are not accepted as a medium of payment in South Africa, they are not considered as a currency for income tax purposes or Capital Gains Tax.

However, whilst not constituting cash, crypto-currencies can be valued to ascertain an amount received or accrued as envisaged in the definition of “gross income” in the Act. Following normal income tax rules, income received or accrued from crypto-currency transactions can be taxed on revenue account under “gross income”.

The onus is on taxpayers to declare all cryptocurrency-related taxable income in the tax year in which it is received or accrued. It is imperative to note that failure to do so could result in interest and penalties.

Taxpayers are encouraged to read the article on the SARS website and make allowances for the additional tax due when cashing in their Bitcoins at a profit. Also, taxpayers who are uncertain about specific transactions involving crypto-currencies are encouraged to seek guidance from SARS.

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