South Africa is the latest country to weigh in on cryptocurrency tax regulations. As more people look toward bitcoins and other cryptocurrencies as a legitimate means of earning an income, the authorities of several countries are looking for a way to regulate the industry.
Even though the digital currency is currently not a legal tender in the country, South Africa Revenue Service SARS has asked citizens trading on cryptocurrency to declare the income or profits earned. The revenue service warned that taxpayers fail to report their cryptocurrency earnings could face a penalty of accruing interests or legal prosecution.
The South African Revenue Service (SARS) also for bitcoin traders on how to report expenses and losses. The framework, SARS’S STANCE ON THE TAX TREATMENT OF CRYPTOCURRENCIES, was published on the services .
The framework describes cryptocurrency (Bitcoin) “as an internet-based digital currency that exists almost wholly in the virtual realm. A growing number of proponents support its use as an alternative currency that can pay for goods and services much like conventional currencies.”
Growing popularity of Digital Currencies in South Africa
Bitcoin is now widely traded in South Africa and even used to pay for services like driving tickets. This perhaps has prompted the South African Revenue Service (SARS) to explore ways generate revenue from it.
The South African Income Tax Act does not explicitly define “currency” and therefore does not back cryptocurrencies as legal modes of exchange nor consider them for Capital Gains Tax (CGT). That notwithstanding, SARS can tax the gains as gross income. The authority sees the purchase of goods or services using cryptocurrencies as trade by barter stating that there is no need for a new interpretation of the Tax Act for cryptocurrencies.
The presentation also noted that due to the ever-increasing recognition and acceptance, the commission is set to provide guidelines on how digital currencies earnings should be estimated for tax purposes.