The South Africa Revenue Service (SARS) is in the process of defining a new regulatory framework for virtual currencies.
The draft guidelines are being produced in response to issues raised by SARS, which noted that in South Africa, the word ‘currency’ was not defined in the Income Tax Act.
The agency explained: "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. Instead, cryptocurrencies are regarded by SARS as assets of an intangible nature.
But because the new draft legislation states that digital currencies such as bitcoin should be classified as intangible assets, it means they would be subject to taxation. If the guidelines do go through, local cryptocurrency holders would be required to declare how much they own and pay taxes on it.
CoinFrenzy warned that such a move goes against what many believe to be the unique features of virtual currencies, which is that they are anonymous and decentralised. However, if the guidelines are passed, cryptocurrency holders in South Africa will no longer have complete anonymity.
Crypto transactions will remain exempt from VAT as a distinction has been drawn between crypto-transactions and financial service transfers though, according to the draft legislation.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
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The South Africa Revenue Service (SARS) is in the process of defining a new regulatory framework for virtual currencies.
The draft guidelines are being produced in response to issues raised by SARS, which noted that in South Africa, the word ‘currency’ was not defined in the Income Tax Act.
The agency explained: "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. Instead, cryptocurrencies are regarded by SARS as assets of an intangible nature.
But because the new draft legislation states that digital currencies such as bitcoin should be classified as intangible assets, it means they would be subject to taxation. If the guidelines do go through, local cryptocurrency holders would be required to declare how much they own and pay taxes on it.
CoinFrenzy warned that such a move goes against what many believe to be the unique features of virtual currencies, which is that they are anonymous and decentralised. However, if the guidelines are passed, cryptocurrency holders in South Africa will no longer have complete anonymity.
Crypto transactions will remain exempt from VAT as a distinction has been drawn between crypto-transactions and financial service transfers though, according to the draft legislation.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
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Could cryptocurrencies simplify global payroll?
