Is Cryptocurrency Taxed in South Africa?
Similar to other revenue authorities, the South African Revenue Service (“SARS”) has confirmed that gains arising from crypto transactions would be seen as capital gains or as personal income. Crypto assets are considered to be “financial instruments” for South African tax purposes.
This means if you have sold, exchanged, used, or received crypto assets, you may be liable to pay taxes on the concomitant profits. It also means that you should consider all crypto asset transactions made during the year, including crypto-for-crypto transactions, and internal platform transactions, not just crypto sold for fiat or withdrawals from an exchange.
When calculating a gain, SARS requires that all investors must use either the FIFO (First In, First Out) or Specific Identification as their cost basis method.
Thankfully, SARS allows trading costs and any other costs related to the purchase or disposal of crypto assets to increase your cost basis, reducing your taxable gain. However, certain restrictions do apply, and it is best
''Taxpayers are also entitled to claim expenses associated with crypto assets accruals or receipts, provided such expenditure is incurred in the production of the taxpayer’s income and for purposes of trade''.
Finally, Provisional taxpayers do not have their own tax brackets but must file their taxes three times during a singular tax year.
You are a provisional taxpayer if you earn income other than a salary (i.e., any income on which the tax is not paid over to SARS on your behalf), of which, some examples are noted below:
- Trading income (such as crypto asset trading);
- Investment Income (such as passive crypto asset gains);
- Rental Income; and
- Freelancer Income.
When filing provisional tax returns, in August and February each year, a provisional taxpayer is required to estimate their total (crypto and non-crypto) income and gains for the year. They are also required to pay:
- 50% of the estimated liability to SARS after filing their first provisional tax return in August; and
- the balance of the estimate must be paid to SARS after filing their second provisional tax return in February.
The annual tax return, filed during the annual filing season, will be the final step to close off the previous tax year. Filing season is generally extended for provisional taxpayers, who thus have more time to file their annual returns.
Before you think about filing, it's essential to know the most critical deadlines for South African taxpayers.