South Africa Orders Taxpayers to Declare Cryptocurrency Gains

The South African Revenue Service (SARS), the revenue service of the South African government, is ordering taxpayers to declare cryptocurrency gains and losses or risk facing penalties, regardless of how unclear the tax rules are at the moment.

South Africa’s Tax Agency to Apply Penalties on Those Who Fail To Declare Cryptocurrency Gains

South Africa’s revenue service has defined cryptocurrencies as intangible assets, instead of a currency, for income tax purposes or capital gains tax. All the cryptocurrency-related income must be declared and the onus is on taxpayers as failure to comply may result in interest and penalties.

“Whilst not constituting cash, cryptocurrencies can be valued to ascertain an amount received or accrued as envisaged in the definition of ‘gross income’ in the Act”, said SARS. The agency offers guidance to taxpayers who are uncertain about specific transactions involving cryptocurrencies.

According to SARS, taxes are applicable to cryptocurrency mining, trades on cryptocurrency exchanges, and the purchase of goods and services using digital money. On the other hand, taxpayers can claim expenses associated with cryptocurrency accruals or receipts, as long as they are related to income generation and for purposes of trade.

Regarding value-added tax (VAT), the South African government is still considering how to apply to cryptocurrencies: “Pending policy clarity in this regard, SARS will not require VAT registration as a vendor for purposes of the supply of cryptocurrencies,” said SARS in a statement.

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