Guide to Crypto Taxes in South Africa for 2023
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The South African Revenue Service (SARS) considers and taxes cryptocurrencies such as Bitcoin to be "assets of an intangible nature" as opposed to currency or property. The agency has not released comprehensive guidance on crypto taxation, but has increased its scrutiny of crypto transactions, in line with its move to create a more robust regulatory framework for fintech.
What is considered a taxable event?
In theory, SARS considers the disposal of cryptocurrency to be a taxable crypto capital gains event. However, there is not any guidance about how crypto transactions would be determined to be capital gains transactions. For equity shares, capital gains tax treatment kicks in after an asset has been held for more than 3 years.
South African law firm Webber Wentzel suggests that previous tax rulings about held Krugerrands may determine capital-deeming rules for cryptocurrency.
Taxes on crypto-to-crypto trades
SARS views crypto-to-crypto trades as barter transactions and taxes any profit as capital gains (18%). Gains are calculated by subtracting the fiat value of coin A at the time of purchase from the fiat value of coin B at the time of the trade. Associated expenses may be claimed on taxes.
South African crypto to crypto trade example
Alicia bought 1 ETH for 11,000 ZAR.
Several years later, she trades 1 ETH for 15,000 XLM (fiat value of 60,000 ZAR).
Alicia would report a gain of (60,000 ZAR-11,000 ZAR=) 49,000 ZAR.
Taxes on crypto payments for goods or services
Crypto payments for goods or services are also considered barter transactions and are taxed as outlined in the section above.
Mining, forking, staking, and airdrop income
If kept in the revenue account, crypto mining, staking, airdrops, and hard fork proceeds are considered income and taxed at 45%. However, if the owner intends to hold the mining income long term, they would receive the capital gains tax rate (18%).
Webber Wentzel advises that staking income is unlikely to meet the criteria of interest income and therefore not included in the annual interest income exemption amount.
The South African tax agency also clarifies questions on which crypto accounting methods are acceptable. The crypto “purchase price is determined on the date of the earlier of receipt and accrual. Cryptocurrency is not regarded as a share and therefore SARS does not treat it as the average for the year.”
In other words, you should not use the average cost or last in, first out (LIFO) accounting method. To be conservative, a first in, first out (FIFO) approach is best, although specific identification is not excluded by the tax rules.
SARS crypto tax audits
In early 2020, SARS was quoted by a series of South African media sources as expanding their cryptocurrency audit and detection services. They have publicly listed employment opportunities specifically geared towards cryptocurrency tracking.
In their 2018 tax guidance, SARS commented that it has been“granted a wide range of collection powers in terms of the Income Tax Act” in regards to cryptocurrency.
SARS clarifies in its guidelines that “taxpayers may be subject to penalties [for having treated a cryptocurrency transaction in a manner that is inconsistent with South African tax laws]... See Chapter 16, and section 223 specifically, of the Tax Administration Act, 2011.”
Learn more about crypto taxes in other countries in our crypto tax guide.
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Last reviewed by Tynisa (Ty) Gaines,EA on November 15, 2023 · Sources