Without liquidity pools DeFi would not exist, as they are the backbone of decentralized exchanges and platforms, removing the need for a centralized 'market maker' such as Binance or KuCoin.
- We will assume interest received from liquidity pools is seen as crypto income, similar to interest from a bank.
As liquidity pools are simply decentralized lending platforms, the treatment should be the same as DeFi interest or rewards.
Deciding to take her Bitcoin off a centralized exchange, Nataly sent it to a DeFi liquidity pool hoping to earn some rewards from her stake.
Locking in a 3-month stake for 13% APR guaranteed, she forgot about it. Her locked Bitcoin had a value of R95,000 at the time of locking.
It is currently unclear whether SARS tracks a crypto assets cost basis at the time earned or at the time claimed.
Her total reward from providing liquidity was R3,088 (R95,000 * 13% / 4)
As she will be seen as an investor, Nataly will be fully taxed on her R3,088 crypto income.
Total Tax Payable: R555 (R3,088 * 18%)