The South African Revenue Service (SARS) said it will continue to apply normal income tax rules to cryptocurrencies and will expect affected taxpayers to declare cryptocurrency gains or losses as part of their taxable income.
SARS announced that taxpayers will bear responsibility for declaring all cryptocurrency-related taxable income in the tax year in which it is received or accrued. Should a taxpayer fail to declare the income, interest and penalties will apply.
If a taxpayer is uncertain about specific transactions involving cryptocurrencies, they may seek guidance from SARS.
SARS also said it is currently guided by the existing tax framework when it comes to the tax implications of cryptocurrencies, while it regards cryptocurrencies as assets of an intangible nature.
According to SARS, cryptocurrencies can be valued to ascertain an amount received or accrued as envisaged in the definition of “gross income” in the Act, and following normal income tax rules, income received or accrued from cryptocurrency transactions can be taxed on revenue account under “gross income”.
On the positive side, taxpayers are 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.
SARS added that it will not require VAT registration as a vendor for purposes of the supply of cryptocurrencies.