SARS stance on tax treatment of cryptocurrencies
On 6 April 2018, the South African Revenue Service (SARS) published a media statement explaining its tax treatment of cryptocurrencies, such as Bitcoin and Ethereum.
As indicated in the media statement, SARS will apply normal income tax rules to cryptocurrencies, and will expect affected taxpayers to declare cryptocurrency gains or losses as part of their taxable income. The onus rests on taxpayers to declare all cryptocurrency-related taxable income in the tax year in which it is received or accrued.
SARS has indicated that it regards cryptocurrencies as “assets of an intangible nature”, and not as currency for income tax purposes or capital gains tax. It indicates further that income received or accrued from cryptocurrency transactions can be taxed on revenue account under gross income; alternatively, the gains may be recognised as capital in nature. According to the media statement: “Determination of whether an accrual or receipt is revenue or capital in nature is tested under existing jurisprudence (of which there is no shortage).”
Taxpayers are also entitled to claim expenses associated with cryptocurrency accruals or receipts, provided such expenditure is incurred in the production of the taxpayer’s income and for purposes of trade.
The media statement, together with a list of frequently asked questions, are accessible here.
Please note: The information contained in this note is for general guidance on matters of interest, and does not constitute legal advice. For any enquiries, please contact us at [email protected].