Clarity on CGT vs Income Tax

bluebirdy

New Member
Joined
Jan 13, 2019
Messages
4
Hey guys,

My apologies for bringing up a thread of which there is already much detail, I've done my best to go through the various threads both here and on other forums but I still feel the information is vague especially to those of us that do not have legal backgrounds.

There are quite a few articles from April last year about the SARS decision at the time, but they are all pretty much the same, so I will use this example as reference:
https://www.bizcommunity.com/Article/196/512/176304.html

They state that in April 2018 SARS announced that it would continue applying normal income tax rules to cryptocurrencies and will expect taxpayers to declare cryptocurrency gains or losses as part of their taxable income.

But further on the article read "Following normal income tax rules, income received or accrued from cryptocurrency transactions can be taxed on revenue account under “gross income”. Alternatively such gains may be regarded as capital in nature, as spelt out in the Eighth Schedule to the Act for taxation under the CGT paradigm."

So my questions are as follows:
1) Does the declaring of crypto gains or losses only apply when the crypto isn't classified as CGT
2) When would it be classified as CGT?
3) My scenario is this - I've invested an amount in various cryptos that I don't want to draw at least around late 2021 (hypothetically). Do I need to draw from that fund if there are gains or losses even if I have no intention of drawing before 2/3 years have accumulated.

I really would appreciate any assistance with the questions. Many thanks from a tax novice.
 

Sumen

Expert Member
Joined
Mar 30, 2016
Messages
4,667
Hey guys,

My apologies for bringing up a thread of which there is already much detail, I've done my best to go through the various threads both here and on other forums but I still feel the information is vague especially to those of us that do not have legal backgrounds.

There are quite a few articles from April last year about the SARS decision at the time, but they are all pretty much the same, so I will use this example as reference:
https://www.bizcommunity.com/Article/196/512/176304.html

They state that in April 2018 SARS announced that it would continue applying normal income tax rules to cryptocurrencies and will expect taxpayers to declare cryptocurrency gains or losses as part of their taxable income.

But further on the article read "Following normal income tax rules, income received or accrued from cryptocurrency transactions can be taxed on revenue account under “gross income”. Alternatively such gains may be regarded as capital in nature, as spelt out in the Eighth Schedule to the Act for taxation under the CGT paradigm."

So my questions are as follows:
1) Does the declaring of crypto gains or losses only apply when the crypto isn't classified as CGT
2) When would it be classified as CGT?
3) My scenario is this - I've invested an amount in various cryptos that I don't want to draw at least around late 2021 (hypothetically). Do I need to draw from that fund if there are gains or losses even if I have no intention of drawing before 2/3 years have accumulated.

I really would appreciate any assistance with the questions. Many thanks from a tax novice.
“The facts in regards to the nature of the transactions will determine whether capital gains tax or normal income tax will apply,” said Retief.

“Typically, a person who trades regularly with cryptocurrencies may be subject to normal income tax.
“In some cases, there may be limitations or even ring-fencing that may apply in regards to losses.”

The situation described above applies to day traders and short-term investors, and Retief added that capital gains tax could apply in the case of long-term investments.

“Where a person purchases and holds a cryptocurrency for a long period aimed at investing or capital growth, the profits or losses may be subject to capital gains tax instead of normal income tax,” said Retief.
https://mybroadband.co.za/news/cryptocurrency/257049-calculating-how-much-bitcoin-tax-you-must-pay-sars.html
 

bluebirdy

New Member
Joined
Jan 13, 2019
Messages
4
Hey Sumen, thanks so much for your response! Could I ask what is defined as long period though? In some cases I have read that your crypto would fall under CGT if you have held it for over 2 year and in other it mentions over 3 years. Is there anything definitive on this?
 
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