- May 4, 2012
And this is where you misunderstand things and go reductio ad absurdum. Now first remove the words crypto and currency because those are just confusing you. Now Sars has declared that it's an asset. So let's look at how assets are treated, specifically capital.Well I guess everyone will have to make up their own mind. And frankly I don't care if your tax return wins a Hugo award for best work of fiction. That's very much your own business
But there are others reading this too, so lets contrast the two views:
On the one hand we've got an analysis by a tax partner/lawyer/CA at a major law firm saying one thing. Said tax expert could indeed be wrong and there is no case law as you say. Nor clarity in law. Nor is the crypto memo particularly clear.
So lets play your version through.
So I barter my BTC asset for a ETH asset at exactly at market BTC/ETH. No tax. Awesomness.
Then I take my ETH and barter it for another asset - a car, again at market rate. No tax. Awesome. Drive the car for years and then dump it on the side of the road. Got my years of use out of it and managed to sneak the gains on my BTC past SARS without them ever seeing a penny. Car dealership approves too. They didn't collect any taxable revenue! In fact I can probably do that with groceries too. And well basically everything.
Or maybe a car is not "like for like" enough for you? The one is after all an intangible asset. How about I swap my ETH for a patent. Or shares? Or right to utilise a car? Or perhaps a DeFi contract if we're keeping it crypto? DAO voting rights? Or maybe you think like for like means only coins? How about I swap my BTC to something with high APY and live off that for the rest of my life. Literally never exit the crypto universe and those 100s of percent gains made just never get taxed till death. I just declare my staking income. Once dead nobody has the keys so that crypto goes up in smoke. SARS never sees a penny on those glorious 100s % BTC gains. Never fiat again!
At the risk of stating the obvious...SARS is in the business of collecting tax. There is indeed some uncertainty but if I'm filling out tax returns I don't assume an interpretation that basically implies SARS closes shop because everyone is too busy dreaming up clever barter schemes of all flavours in this brave new world of creative tax structuring and fiat dies.
Still no? UK and US have both said BTC<>ETC is taxable event.
Still no? Look at SARS's crypto memo. Specifically:
Look very carefully at their choice of words "realized [...] through a barter transaction". I'd personally interpret that as gains realising (cause not sure what else you'd realize frankly), but it's somewhat vaguely worded.
Anyway...two opinions...one of them is gonna to be wrong & result in a sht load of serious tax problems for whoever went with it (or they'll just realize they ****ed up their past returns badly and go with tax evasion option). My money is on the "without incurring tax" crowd catching the wrong end of the stick but who knows. Swa's version would certainly be 100x more fun.
I disagree that it's just opinions and we'll have to wait till there is case law though. My crystal ball says we'll know soon. Look at the last time SARS opened it's mouth on crypto
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Just about enough time to realize there is a spike in people's net wealth and get a memo through internal reviews to cover it. Going out on a limb here but I don't think that pretty spike on the right snuck past the chaps over at SARS...
I specifically said like for like. Paying for my haircut by using a bag of apples is not like for like. In both cases a benefit was realised. But suppose I have a property in Sandton worth R10m and you have one in Cape Town worth R10m. A simple exchange would not result in any monetary benefit specifically as linked to the capital nature of the transaction.
Your mistake is in assuming that no tax is paid. That is not the case. In reality tax is deferred and paid on the original purchase price when disposing of the property.
Now back to crypto. Sars has taken the stance it's not currency. Interestingly currency has no definition in tax law. A court may decide it is currency or a hybrid or even dependent on intent.
On to the second part. Sars has decided it's an asset. What type of asset isn't clear as they themselves don't know. The car analogy is flawed. The key is that in all barter transactions where like for like assets are traded there is no financial benefit arising out of the transaction and the assets retain their capital nature instead of merely being employed to avoid using currency. There is no avoidance of paying tax as the net taxable amount at the end is still the same.
It may be the case that crypto is a capital asset or it may be that it's used as a medium of transacting. You can refer to experts all you want but that's no different to referring to experts about the start of the universe, just nobody knows at this point. It was mentioned by someone here how complex tax law is. Ask two "experts" the same question and both will likely give you a different answer based on established law. And you expect there to be a clear answer to something like crypto? Just a big fat LOL to that.
As always the advice is to consult with a professional but know they may not be right. Until case law is established it's all just guess work at this point.
The big irony is that those who keep claiming they don't owe Sars anything because they trade on Bitmex and don't do conversions may be most liable here. Under tax law it makes no difference. Fruit of the tree applies. The tree is the activity that generates a profit in this case trading. If at the end of the day you have more than what you started with you have undertaken an activity that generates a profit and is liable to paying tax. It's no different to mining.