FREQUENTLY ASKED QUESTIONS
Since its inception in 2009, there have been several doubts raised about crypto assets. If the wrong information is provided, eager investors could lose millions of rands, to say the least, especially when it comes to taxation.
The truth is that crypto asset taxation is here to stay, so let us assist you in getting your facts straight.
Questions related to the Crypt Tax Interview with Thomas Lobban and Heinrich Grove (SA Accounting Network)
Taxes are due when you make a profit or when receiving crypto rewards/interest.
Find out more here: (02:20 – 05:20)
Normal tax applies when you are actively trading crypto for a profit. Capital gains tax applies when you buy and hold crypto for a long-term investment.
Find out more here: (05:20 – 08:20)
These costs must be split into revenue costs and capital costs and deducted accordingly. Special rules apply.
Find out more here: (09:30 – 11:50)
These losses must be disclosed to SARS as they can be deducted against future profits. T&C applies.
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Taxes are due when you sell fiat for crypto and when you swop coins for another.
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Please refer to the video as this a in dept answer.
Find out more: 14:37 – 16:55
It is not regulated at this time and not permitted according to SARS and the SARB.
Find out more: (16:56 – 19:38)
Your information gets shared with the authorities where you are a tax resident and therefore you need to declare
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Yes, SARS will find out of you are not declaring your crypto.
Find out more: (20:35 – 23:55)
Your historic crypto profits/losses will need to be declared to SARS by re-submitting past returns.
Find out more: (25:06 – 27:06)
We can certainly assist in this matter as we pride ourselves as being the market leader.
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OTHER FREQUENTLY ASKED QUESTIONS
A tax event will arise when a transaction is carried out. Where a crypto asset is sold for money / fiat or exchanged for another asset (such any other crypto, including a stablecoin). Further, tax must also be taken into account in respect of a crypto asset that is rewarded to you, e.g. reward tokens earned for staking crypto assets.
Crypto asset profits and gains are taxable, despite an investor not withdrawing a money / fiat amount. This is due to the fact that disposing of crypto assets, or earning crypto assets as quid pro quo (such as staking rewards and crypto interest) are taxable events. This must be taken into account and declared to SARS upon the filing of your returns.
It must be understood that crypto profits will not always be subject to Capital Gains Tax (“CGT”), but may instead be revenue in nature. CGT has an effective maximum tax rate of 18% for individuals, whereas revenue-based (normal) tax is subject to a maximum rate of 45% for individuals.
Each type of transaction must be considered on a case-by-case basis. Typically, the presence of a number of trades in a single tax year demonstrates that the crypto assets are being traded as part of a scheme of profit-making and which makes it revenue in nature (i.e., up to 45%). Crypto assets which are held for a long period without transactions being made, or directly used to make other income (in cash or otherwise), may possibly be treated as capital in nature.
Crypto assets are ring-fenced in terms of the Income Tax Act (58 of 1962), which means that a loss in respect of the acquisition or disposal of any crypto asset may not be deducted from non-crypto gains in that tax year where the relevant investor has also incurred a loss in 3 out of 5 tax years (including the current tax year). If this is the case, such a loss may only be used to offset subsequent crypto gains.
Mining cryptocurrency is generally seen as being revenue in nature (i.e., up to 45% for individuals). The market value of the rewarded cryptocurrency earned from your mining will therefore be taxable as this is seen as a trade for tax purposes. Certain running expenses, such as utility bills, may be deductible depending on whether these expenses were incurred in producing the (crypto) income. However, costs incurred in respect of the equipment (or any other assets) that are used to generate the (crypto) income may only be offset against subsequent capital gains.
Where a taxpayer (being an individual or a company) obtains an unconditional right to crypto assets, it will be a taxable event. This applies even where the crypto assets are not actually received as yet. Therefore, the total amount (or market value thereof) must be declared to SARS and tax paid thereon.
It does not matter where the funds are deposited from or withdrawn to, regardless of whether this is inside or outside of South Africa. If you are a South African tax resident, or otherwise conduct trades (or call the shots) while you are physically present in South Africa, tax is leviable in South Africa. Foreign financial institutions are obligated to provide SARS with relevant information in terms of global Common Reporting Standards as well as in terms of Taxpayer Information Exchange Agreements that South Africa has in place with 87 jurisdictions worldwide. Further, South Africa has a network of Double Tax Agreements with 121 other countries around the world which provide for the exchange of taxpayer information upon SARS’ request.
Unfortunately, crypto assets have always been taxable. In April 2018, SARS confirmed that the normal tax rules apply to crypto assets. Crypto assets have always been considered to be intangible assets for tax purposes, which means they are subject to tax on their disposal or acquisition for quid pro quo.
The value of crypto assets must be determined with reference to the market value on a particular platform or exchange, as there is no universal price that may be used – the price differs depending on the marketplace. The value of crypto assets must be determined at the time of a relevant transaction. Where a crypto platform does not provide a ZAR value, the income tax rules for foreign currency conversion must be applied. Where a platform does not provide any monetary value (ZAR or foreign) then a SARS-accepted method for valuation must be applied. For SARS reporting purposes, an investor must be sure to include transactional reports from all relevant platforms, a reconciliation of their transactions (with computations showing aggregate profit / loss) and other documentation to support their stated intention(s), investment strategies as well as the appropriate tax treatment to be applied.
The transfer of crypto assets from and to South Africa is currently permitted. However, individuals are subject to a monetary Single Discretionary Allowance of R1 million that can be transferred outside of South Africa per calendar year. Should an individual seek to transfer more than R1 million from South Africa, they must obtain SARS clearance for a Foreign Investment Allowance (“FIA”) of up to R10 million per calendar year. This applies for each subsequent R10 million thereafter within the year.