Did you know that digital currency transactions are taxable? Yes, the long arm of the law – read “SARS” – wants to know all about your cryptocurrency profits and losses, along with your normal tax-related declarations.
SARS has tightened control over taxpayers’ crypto holdings and trading activities, more so since cryptocurrency was defined as a financial instrument in the Income Tax Act (January 2019).
In South Africa, several worrying misconceptions have emerged following the surge in crypto currency trading, such as that it is untraceable and therefore not taxable, or that the buying and selling of digital assets is only subject to capital gains tax, or even that an item only becomes taxable when digital currency is converted to fiat currency.
Does one need to pay tax on crypto assets? Yes, according to SARS. ‘Normal income tax rules apply to crypto assets and affected taxpayers need to declare crypto assets’ gains or losses as part of their taxable income.’
And SARS has made it the responsibility of you and me to be honest and open about crypto trading. ‘The onus is on taxpayers to declare all crypto assets-related taxable income in the tax year in which it is received or accrued. Failure to do so could result in interest and penalties.’
So, if you’re riding high on the Bitcoin boom and hauling in profits (or losses) of any magnitude, SARS wants to know all the details. Warnings have been issued to crypto investors that those who do not declare profits will face penalties by SARS, and they are looking to make examples of non-compliance.
We urge you to avoid an unpleasant tax bill or a spat with SARS by declaring your crypto assets.