If you decide to trade your crypto, your trade will be liable for capital gains tax on any gain made. Gains are made when your proceeds are more than your cost basis.
You can increase your cost basis by including any sales fees or network fees related to the sale of your crypto assets.
SARS has not stated whether any crypto assets are free from taxation; therefore, we must assume all crypto-to-crypto trades are taxable as a capital gain.
This should include trades into stablecoins, utility tokens, and more.
Remember: SARS requires you to use the FIFO method when calculating your cost basis. Luckily, Recap automatically does this for you!
Therefore, all crypto-to-crypto trades are taxable, such as:
ETH > USDT
TRAC > BTC
DAI > ETH
Crypto-to-crypto trades have the exact same tax treatment as crypto-for-fiat trades, which you can find here.
As an example, let us look at a crypto-to-crypto trade including Ethereum and a Rand stablecoin.
Although stablecoins are not volatile, we must assume they are considered crypto assets by SARS, therefore fully taxable.
Prince recently bought R60,000 worth of Ethereum with intentions to hold. Quickly realizing Ethereum had doubled in value rapidly, he wanted to sell to secure his gains, believing prices would soon dip.
Moments after, he sold his R120,000 worth of Ethereum into a Rand stablecoin, securing his R60,000 gain.
As Prince quickly bought and sold his Ethereum, will SARS view him as a trader?
Assuming SARS views Prince as a trader, he will have to pay tax on the full gain.
Prince is in the bottom income tax bracket and his R40,000 annual capital allowance was fully available, so he will pay 18% on R20,000,
Therefore, Prince owes R3,600 in income tax (R20,000 * 18%).
Crypto Trading - Recap's Tax Treatment
How Recap Helps
Recap automatically creates disposals and acquisitions for each crypto-crypto trade. This data is classified automatically based on data from your exchanges. Our market leading tax platform calculates crypto tax liabilities for South African crypto investors, using the SARS requested FIFO cost basis method.
Our three-step approach calculates your taxes in minutes.
1. Step 1 - Connect your wallets and exchanges
Recap supports all major crypto-exchanges to make getting your transaction data into our platform simple. We also support data from dead exchanges or anywhere else via CSV file. We take your security and privacy very seriously and use end-to-end encryption to protect your data
2. Step 2 - Check your data
Recap shows you errors and gaps in your data so you can easily get things in order. We apply automated valuations, tax clarifications and use FIFO to calculate your tax position. If needed you can manually add trades, adjust clarifications and tweak your data so you're happy.
3. Step 3 - File your return
See your tax position and download your tax forms ready to file with SARS. If you need a hand our team are available in our in-app chat to answer your queries and we work closely with local crypto-tax experts if you need professional advice.