Cryptocurrencies are increasing in popularity in South Africa. One of the key issues is how do taxation laws affect cryptocurrency in South Africa.

Is the use of cryptocurrency legal in South Africa? Simple answer, yes, it is.

The complicated part is, is whatever you are doing with the cryptocurrency legal? For most of us, the answer is also yes, it is legal.

Pertaining to the impact thereof in South Africa, SARS has formally released their views on taxation of cryptocurrencies (e.g. Bitcoin), which is that income received in the trading of cryptocurrencies is viewed as taxable income and must be declared within the tax year in which it is received or accrued. Therefore, the public is advised to always ensure that he/she remains tax compliant.

It is clear that all asset transactions attract some form of tax, although the South African Revenue Service (SARS) does not specify how cryptocurrency transactions are to be dealt with. Taxation laws do apply when trading cryptocurrency. This includes a possible capital gains tax (CGT), such as when you purchase a bitcoin as an investment and then sell it at a profit, or alternatively, an income tax, where the transactions form part of your ordinary business activities.  Ultimately, when deciding whether your crypto transactions will incur CGT or income tax, certain considerations will be taken into account, for example, intent, the duration for which the asset is held and how it was financed along with a multitude of case law.

However, the Financial Markets Act of 2012 excludes virtual currencies (and this could include cryptocurrencies) from the definition of securities.  Therefore, it does not fall under the regulatory standards applicable to trading securities.

SARS clarifies that since the term “currency” is not legislated in South Africa in the Income Tax, cryptocurrencies are viewed by SARS as assets “of intangible nature”.