SARS recently clarified that, for now, it will not be creating new tax rules for cryptocurrencies. Gains and losses will need to be reported as assets under existing laws.
As announced on April 6, the South African Revenue Service (SARS) will be treating cryptocurrencies as “assets of an intangible nature,” not as traditional currencies, and they will be subject to existing income and capital gains tax (CGT) rules, as laid out in the Income Tax Act.
The notice states that South African tax law does not include a specific definition for the word “currency,” but because the digital assets are not “widely used and accepted … as a medium of payment or exchange” in the country, they should not be treated as cash.
SARS listed three scenarios that would result in cryptocurrency gains and losses:
- Until cryptocurrency that is acquired through mining is bartered or exchanged for fiat, it is considered “held as trading stock.” Once it is exchanged, it would fall under the subsequent scenarios.
- Cryptocurrency can be exchanged for fiat, either through established exchanges or through private transactions.
- When a cryptocurrency is exchanged for goods or services, “normal barter transaction rules apply.”
The tax authority is still reviewing how value-added tax (VAT) will be applied and will not require vendors that supply digital assets to register in this regard until further notice.
SARS warned that failure to properly report cryptocurrency gains or losses “could result in interest and penalties,” and invites investors to reach out for clarification or visit the site’s frequently asked questions on the matter.
This is just the latest in a string of countries that are establishing cryptocurrency reporting requirements. Thailand’s SEC recently announced that trades in crypto would be subject to 15 percent CGT and seven percent VAT, while Australia passed a bill that would eliminate double taxation of digital currency transactions last year.
An American research firm believes that bitcoin’s recent lows are due in part to the impending capital gains reporting requirements in the United States.
Jen Luker is a copy editor and writer for ETHNews. She is inspired by decentralization, the arts, and social causes. She holds value in ETH.
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Source: ETHNews