Bitcoin Trading - Business/Regulation advice sought

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AdeelM

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Hello.

I am new long term resident in South Africa. First of all, I'm loving this country.

I want to sell bitcoins on localbitcoins.com. Looks like there are already many South African sellers on there selling bitcoins locally. They take direct cash deposits or transfers into their bank accounts.

If I were to do the same and sell bitcoins on there, is there anything I should know? Do I need to register as a business with South Africa?

As far as receiving cash from others, will FNB give me a hard time about all of a sudden receiving a bunch of money in my account? (It's a personal FNB account). Do they charge a bunch of fees for receiving these deposits?

Any common issues (scams, etc) I should watch out for? For example, someone deposits cash, but FNB determines it was stolen funds, and they freeze my account? And then I'm down a bunch of bitcoins I paid good money for.

Lastly, (sort of unrelated) is it a problem if I ever want to wire money back home internationally? Are there any limits on that from FNB or South Africa?

Any insight, tips, etc are very welcome.

Thank you!
 
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AdeelM

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Thank you. What does it mean to "declare that ZAR". How do I go about doing that?
 
Thor

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AdeelM said:
Thank you. What does it mean to "declare that ZAR". How do I go about doing that?
Click to expand...

Well if my understanding is correct:

If I have a bitcoin wallet and someone sends me R50k worth of bitcoin I do not need to declare that R50k's worth of bitcoin.

But if I now go to luno and I sell those bitcoins and now in my bank account with Capitec I have received R50K that must then be declared and I will pay tax on the R50K.

That is my understanding, I hear different things depending on who I ask.
 
Tomtomtom

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Welcome to SA!

Bitcoin might not be a regulated currency, but it's an asset with value, so trading it will have tax implications. Are you tax resident here? In all likelihood the tax treatment would depend on the nature of your holding and trade. Once-off sale and it would probably be capital gain/loss. More frequent trading, and any profit will be considered income.

You won't need to register as a business but if it's a reasonably large sum I'd recommend speaking to an accountant at least.

If you're not using an intermediary / escrow, receiving local funds, the sender pays the fee. A common scam would be to send you proof of deposit but not actually make the deposit. I have no experience trading bitcoins so I don't know what other creative frauds you might be exposed to, but once you have the ZAR actually reflecting on your balance -- as confirmed by you -- it's safe. Accounts don't get locked or seized unless *you* committed a crime.

Wiring money home should be easy enough. I can recommend Ozforex for decent rates and good support. SA still has capital controls, sadly, although they're slowly being loosened. They won't affect you unless you're sending millions out, except you might have to fill in a "reason" for your transfer.
 
Thor

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Tomtomtom said:
Welcome to SA!

Bitcoin might not be a regulated currency, but it's an asset with value, so trading it will have tax implications. Are you tax resident here? In all likelihood the tax treatment would depend on the nature of your holding and trade. Once-off sale and it would probably be capital gain/loss. More frequent trading, and any profit will be considered income.

You won't need to register as a business but if it's a reasonably large sum I'd recommend speaking to an accountant at least.

If you're not using an intermediary / escrow, receiving local funds, the sender pays the fee. A common scam would be to send you proof of deposit but not actually make the deposit. I have no experience trading bitcoins so I don't know what other creative frauds you might be exposed to, but once you have the ZAR actually reflecting on your balance -- as confirmed by you -- it's safe. Accounts don't get locked or seized unless *you* committed a crime.

Wiring money home should be easy enough. I can recommend Ozforex for decent rates and good support. SA still has capital controls, sadly, although they're slowly being loosened. They won't affect you unless you're sending millions out, except you might have to fill in a "reason" for your transfer.
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Your wrong. It's not classified as a asset. It practically does not exist as far as Sars are concerned.

Read the official report I linked.

While virtual currencies can be bought and sold on various platforms, they are not defined as securities in terms of the Financial Markets Act, 2012 (Act No. 19 of 2012). The regulatory standards that apply to the trading of securities therefore do not apply to virtual currencies.

Tax implications comes in when you convert the bitcoin into zar


However if I pay you 10 bitcoins into your Blockchain.info wallet then you do not have to let anyone know.

It's effectively the exact same thing as me handing you a piece of rock and we both agree the value is R500 however a rock is not legal tender so gov doesn't care, but if you give that rock to Jonny and Johnny give you R500 for it then you need to declare the R500
 
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Tomtomtom

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Thor187 said:
However if I pay you 10 bitcoins into your Blockchain.info wallet then you do not have to let anyone know.
Click to expand...

Well, it depends. If you give me 10 BTC in exchange for the current value in Rands, there's no taxable income on my side.

But if you paid me 10 bitcoins in exchange for some product or service, it'll most definitely be considered income. It'll be considered income on the accrual basis as well, i.e. immediately, and not when I later exchange it for ZAR, or use it to buy a sound system...

The lack of regulation around the currency / legal tender status of BTC is a separate issue. It means e.g. BTC deposits are not protected like cash at a bank, you can't be required to pay debts in BTC, etc. The doc you linked goes into those aspects. It doesn't deal with tax.

What SARS would want me to do is value the 10 BTC in ZAR based on the market price of BTC in ZAR.

If you gave me a rock and we said, let's call it R500, or 500 BTC for that matter, sure, that might not trigger a tax event, if the market value of the rock was actually zero.

If you gave me a rock made out of diamond, and we said, call it R500, that would be a donation and would be taxable at the market rate... not R500. Obviously, people get creative with this stuff because it's hard to police. If we were related subsidiary companies selling stuff to each other it would be called "transfer mispricing", and we'd get away with it.

Probably nobody in SA has been nailed for not paying taxes on BTC profits, but it'll happen sooner or later. Think of it this way: as business is increasingly done and profits are made in BTC, do you really think revenue collectors are just going to sit back and let those flows pass them by?

But the OP isn't talking about earning income in BTC anyway. He's talking about selling something he's held for a while. If it sells for more than it cost to buy, that'll be a capital gain. The IRS has said this is how it sees it, and SARS would likely be the same. Around 33% of capital gain is included in taxable income.
 
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Thor

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Tomtomtom said:
Well, it depends. If you give me 10 BTC in exchange for the current value in Rands, there's no taxable income on my side.

But if you paid me 10 bitcoins in exchange for some product or service, it'll most definitely be considered income. It'll be considered income on the accrual basis as well, i.e. immediately, and not when I later exchange it for ZAR, or use it to buy a sound system...

The lack of regulation around the currency / legal tender status of BTC is a separate issue. It means e.g. BTC deposits are not protected like cash at a bank, you can't be required to pay debts in BTC, etc. The doc you linked goes into those aspects. It doesn't deal with tax.

What SARS would want me to do is value the 10 BTC in ZAR based on the market price of BTC in ZAR.

If you gave me a rock and we said, let's call it R500, or 500 BTC for that matter, sure, that might not trigger a tax event, if the market value of the rock was actually zero.

If you gave me a rock made out of diamond, and we said, call it R500, that would be a donation and would be taxable at the market rate... not R500. Obviously, people get creative with this stuff because it's hard to police. If we were related subsidiary companies selling stuff to each other it would be called "transfer mispricing", and we'd get away with it.

Probably nobody in SA has been nailed for not paying taxes on BTC profits, but it'll happen sooner or later. Think of it this way: as business is increasingly done and profits are made in BTC, do you really think revenue collectors are just going to sit back and let those flows pass them by?

But the OP isn't talking about earning income in BTC anyway. He's talking about selling something he's held for a while. If it sells for more than it cost to buy, that'll be a capital gain. The IRS has said this is how it sees it, and SARS would likely be the same. Around 33% of capital gain is included in taxable income.
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Sources please.

Tax is not applicable on bitcoins unless you change those over to zar.

If you pay me 5 bitcoins for services rendered like I build your website or cleaned your pool I can let them sit in the wallet no issues.

Bitcoin is not taxable in South Africa
(http://carteblanche.dstv.com/bitcoin/)

If I want to change the coins into zar then I'll pay tax.
 
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Tomtomtom

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Thor187 said:
Sources please.
Click to expand...

There's no SARS guidance I'm aware of. Bottom line is that anyone earning or exchanging BTC must cover their own bases by talking to SARS, an accountant, etc. A general overview though: https://en.bitcoin.it/wiki/Tax_compliance

In particular,

Anything that you receive as payment for goods or services is generally taxable income unless it is specifically exempted.

That means, if you mow your neighbor’s lawn, it doesn’t matter if he pays you $20 in cash, or $20 worth of bitcoins. (Or $20 worth of tomatoes for that matter)

In many jurisdictions, you are still legally required to report that as income. When using Bitcoin for payment the taxing authorities may be less likely to be aware of the payments but try to mow 10,000 neighbor’s lawns and not report the income and you will be much more likely to get caught.
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SARS isn't going to be any different. Unfortunately, while most things in life are permissible unless govt says otherwise, making money is taxable unless govt says otherwise. The absence of guidance from them only means bitcoin isn't exempted.

And still re. profits rather than capital gain, but a local view:
https://www.taxtim.com/za/blog/declaring-profit-on-bitcoin-trading-and-speculation

I'm not sure what Carte Blanche is smoking.

Conversion of BTC to ZAR *may be* a tax event but I'm not sure why you think it's the only one. Read up on the "accrual basis" to understand how our system works. The BTC->ZAR conversion may even be the point at which you get a refund under certain circumstances.
 
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HavocXphere

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200.gif

omg people. You're both wrong. It would be treated like any other inventory - Income tax act section 22.

Thor187 said:
If you pay me 5 bitcoins for services rendered like I build your website or cleaned your pool I can let them sit in the wallet no issues.
Click to expand...
You would need to declare that income regardless of whether they pay you in ZAR, cows, bitcoin or nik naks. If you don't...tax evasion.

@OP - don't use a personal account.
 
Thor

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Tomtomtom said:
There's no SARS guidance I'm aware of. Bottom line is that anyone earning or exchanging BTC must cover their own bases by talking to SARS, an accountant, etc. A general overview though: https://en.bitcoin.it/wiki/Tax_compliance

In particular,



SARS isn't going to be any different. Unfortunately, while most things in life are permissible unless govt says otherwise, making money is taxable unless govt says otherwise. The absence of guidance from them only means bitcoin isn't exempted.

And still re. profits rather than capital gain, but a local view:
https://www.taxtim.com/za/blog/declaring-profit-on-bitcoin-trading-and-speculation

I'm not sure what Carte Blanche is smoking.

Conversion of BTC to ZAR *may be* a tax event but I'm not sure why you think it's the only one. Read up on the "accrual basis" to understand how our system works. The BTC->ZAR conversion may even be the point at which you get a refund under certain circumstances.
Click to expand...

HavocXphere said:
View attachment 414644

omg people. You're both wrong. It would be treated like any other inventory - Income tax act section 22.


You would need to declare that income regardless of whether they pay you in ZAR, cows, bitcoin or nik naks. If you don't...tax evasion.

@OP - don't use a personal account.
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Call carte blanc and tweet to Sars why they lied.

I've asked and went to Sars.

Bottom line is South Africa Bitcoin is not taxable that's Sars official answer on the matter.

The link you posted was a accountants opinion. I won't hire him.
 
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HavocXphere

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Thor187 said:
Call carte blanc and tweet to Sars why they lied.

I've asked and went to Sars.

Bottom line is South Africa Bitcoin is not taxable that's Sars official answer on the matter.

The link you posted was a accountants opinion. I won't hire him.
Click to expand...
If that were true then half the businesses out there would have switched to accepting bitcoin. Easy way of scoring a free 28% profit!

Don't care what muppet at SARS you spoke to they're wrong too.

Besides tax act makes it quite clear that it's not just cash:

in the case of any resident, the total amount, in cash or otherwise, received by or accrued to or in favour of such resident
Click to expand...
 
Thor

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HavocXphere said:
If that were true then half the businesses out there would have switched to accepting bitcoin. Easy way of scoring a free 28% profit!

Don't care what muppet at SARS you spoke to they're wrong too.

Besides tax act makes it quite clear that it's not just cash:
Click to expand...
Bitcoin is not legal tender so your qouted part is irrelevant.

Like I said tweet Sars ask them and post the answer here.
 
Thor

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HavocXphere

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Thor187 said:
Bitcoin is not legal tender so your qouted part is irrelevant.

Like I said tweet Sars ask them and post the answer here.
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my god you're confused.

Legal tender has *nothing* to do with whether something is taxable. It's not even the right bloody act:

Legal tender > South African Reserve Bank Act
Tax > Income Tax Act

Credit cards also aren't legal tender yet companies pay taxes on the money the receive via them. Same for paypal, paying in sheep or anything else you can come up with.

And no I don't need to tweet them idiotic question because its in the income tax act as per above which carries way more weight than anything SARS staff says. Even if it wasn't it's basic common sense...you can't bypass the entire SA tax system by accepting payment in something other than cash.
 
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