South Africa is one of the countries where the growth, adoption, and use of bitcoin and other cryptocurrencies continue to move at a fast pace. People are looking for how to buy bitcoin now more than ever.
However, a lot of crypto traders are facing pressure from the South Africa Revenue Service (SARS) regarding their cryptocurrency investments. This has raised a lot of panic in the South Africa crypto community.
Since the main purpose of digital assets is to encourage anonymous P2P transactions anywhere around the globe, they are used by some as a tool to bypass tax. To curtail this, SARS has joined a number of tax bodies around the world in monitoring profits made by crypto traders for appropriate taxation.
Cryptocurrency trading is presently unregulated in South Africa, however, the government is taking necessary steps to control the digital asset community in the country.
South Africa released its first statement regarding cryptocurrency in 2014. The South African Reserve Bank released warnings about the risks involved in dealing in bitcoin and other cryptocurrencies, stating that there is no legal protection for citizens engaging in crypto.
Two years later, the government created a group named the Intergovernmental Fintech Working Group (IFWG) to enable cooperation and interrelationship among the policymakers of fintech developments. In 2018, another working group called the Crypto Asset Working Group was created which included members of the IFWG and the South Africa Revenue Service was established for analyzing and evaluating the country’s position on digital assets.
SARS later released a statement to explain the tax status of digital currencies in the country.
There is no statement regarding the crypto ban in the country. This implies that citizens can still buy bitcoin in South Africa, although the reserve bank did state that any earnings or profit made from these transactions are subject to tax.
However, lately, some citizens that have purchased crypto in the past few years are being audited by the SARS, sending letters asking them for details of crypto-related investments.
SARS is strictly monitoring people who are investing in bitcoin, people illegally transferring funds out of the country through this means, and other forms of illegality that may be done through cryptocurrencies. They are working hard to eliminate tax leaks to maintain a stable tax rate.
Luno, a popular crypto trading platform explained that in recent times, more South Africans are making requests to download their transaction histories which will most likely be used for tax reasons.
What does SARS want?
The South African Revenue Service explained in a statement released on the 6th of April 2018 that it is compulsory for all taxpayers to declare every crypto-related taxable income in the tax year in which it was earned. Failure to do so could attract penalties.
How does SARS tax crypto income?
The South African Revenue Service doesn’t regard crypto as a currency but as an asset of intangible nature. So money made through crypto investment will probably be taxed as income or capital gain tax. This boils down to whether you are a long-term investor or an active trader.
The tax authority explained that crypto profits and losses can widely be described in three different scenarios, with each having its unique tax consequences.
The first scenario is crypto gotten through the mining process. Miners are rewarded with bitcoin for solving a complex cryptographic problem to secure the network and process Bitcoin transactions.
Bitcoin miners are paid fractions of bitcoin for mining and processing transactions on the blockchain. This implies that until the crypto earned through mining is converted to cash, it cannot be taxed.
The second scenario is when a trader exchanges fiat for crypto or crypto for fiat through crypto exchanges or even private trades.
The last scenario is a barter transaction where you are paid for a service rendered or you receive crypto as a form of payment for goods.
Must a crypto trader register for VAT?
At the moment, a crypto trader doesn’t need to register for VAT because it is classified as a financial tool. This implies that when a taxpayer issues, receives or trades any crypto, the action is deemed a supply of financial service which is considered as an exempt supply.
Can I still engage in bitcoin trading?
With the current situation, crypto trading might seem like an offence, however, it’s not. You can still engage in crypto and bitcoin trading. However, Since SARS has made the crypto community its priority, abiding by the tax laws laid down by SARS is very vital. Calculating taxable amounts from your exchange statements and answering audits honestly will ensure that you are trading cryptocurrencies legally.
The best exchange where you can trade bitcoin in South Africa:
The SARS crackdown hasn’t stopped the activities of cryptocurrency exchanges in the country. Therefore, you can still trade, invest and buy bitcoin in South Africa. You can do all of these legally through the Remitano P2P exchange.
Remitano is a P2P platform that serves as a meeting place for sellers and buyers of crypto. It is the most popular and reliable P2P exchange with its service available in multiple countries including South Africa. Remitano interface is easy to use for newbies and professional traders. All you need to do is create an account, verify your account, and you are ready to start trading bitcoin.
In conclusion, many people believe that the increased adoption of crypto in the country is attracting greater regulatory interest and it wouldn’t be surprising if SARS releases new rules regarding crypto in SA. Taxpayers engaging in any form of crypto activity should keep records of all trades and tender their activities to the relevant tax authorities at the appropriate time.
Read about the top African countries adopting crypto in 2021.
By Staff Writer.