Cryptocurrency Tax Law Draft Is Released in South Africa
According to the draft, digital currencies are classified as intangible assets subject to income tax. This means, that declaration of income accrued from crypto transactions will be obligatory by law.
Another significant point relates to the VAT question. The draft states that crypto transactions will be exempted from this tax. The South Africa Revenue Service (SARS) separates crypto operations from financial services ones. Therefore, all activities with cryptocurrencies - purchasing, selling, transferring, issuing, holding - are excluded from VAT payment.
The tax law draft came after SARS press release in April, when the agency announced plans to tax income earned by digital currencies transactions. Press release stated: “In South Africa, the word “currency” is not defined in the Income Tax Act (the Act). Cryptocurrencies are neither official South African tender nor widely used and accepted in South Africa as a medium of payment or exchange. As such, cryptocurrencies are not regarded by SARS as a currency for income tax purposes or Capital Gains Tax (CGT). Instead, cryptocurrencies are regarded by SARS as assets of an intangible nature.”
It is expected that the draft will see further modifications. The cryptocurrency market in South Africa shows a growing trend. Latest survey revealed, that 38% of South Africans wished they had invested in digital currencies much earlier.