South Africa Crypto Regulations for Tax Being Drafted
The South Africa Revenue Services is writing a new draft of the South African crypto regulations. This is to define a new framework for regulations related to virtual currencies in South Africa.
This move is similar to what a lot of governments are doing around the globe. Furthermore, this news comes at a time when the South African crypto industry is rapidly expanding and therefore calls for the need for a better framework.
These drafts on crypto regulations follow up on the issues that were raised in April by the South Africa Revenue Services who had announced their plans to tax those who had investments in cryptocurrencies.
In a press conference statement in April, the Revenue Services laid down their original plans. They said,
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.
However, the new draft has stated that digital currencies like bitcoin will be classified as intangible assets and are therefore now subject to taxation. If the government body manages to get the draft passed, local crypto holders will be required to declare how much they own in crypto and pay taxes on their virtual currency holdings.
This new draft goes against what many believe to be the unique feature of crypto- that it is anonymous and decentralized. However, with the declaration of holdings, crypto users in South Africa will not have complete anonymity.
The draft further adds that crypto transactions are exempt from Value Added Tax(VAT). This decision was made because of the distinction made between crypto transactions and financial service transfers. This, after all, shows leniency towards crypto.