Crypto Mining and Tax

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srothman

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I've read drips and drabs here and there about the potential tax implications of mining crypto and making profit from it. I figured since I'm going to be more invested in it in the months to come, I should have my ducks in a row.

Do I merely declare the profit as income and have it taxed accordingly? How do I explain the money flowing into my account from, say, Luno? Am I obliged to?
 
Money from luno is taxable.

Dont spend bitcoin let it flow into some other wallet not connected to your identity and let it grow then when SA is broken you move to china and live off your hodl'ed wealth.
 
So you can have money, so long as you don't spend it ;)

What happens when I have R1m worth of Bitcoin that I want to cash out because I want to invest in the strip joint down the road? How would I go about doing this?

As mentioned previously, the whole idea for me is to have a stead income, whatever it may be, rather hording coin.

What would be the easiest/best way to do that? Don't the same income tax rules apply if declared as such, ie no tax below a certain threshold?
 
srothman said:
So you can have money, so long as you don't spend it ;)

What happens when I have R1m worth of Bitcoin that I want to cash out because I want to invest in the strip joint down the road? How would I go about doing this?

As mentioned previously, the whole idea for me is to have a stead income, whatever it may be, rather hording coin.

What would be the easiest/best way to do that? Don't the same income tax rules apply if declared as such, ie no tax below a certain threshold?
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If you echange that 1 mil to zar you will pay tax. (What tax, CGT, TT, income or other) I am not sure.
 
As I understand SA tax law, you're obliged to report all your earnings in whatever form, whether converted to ZAR or not. Fiat, crypto, cash or kind matters not. Mining can be deemed to be a commission earned on the provision of computing power. You have to declare a Rand value of everything for tax purposes. Wet van Transvaal. Period.
 
Arthur said:
As I understand SA tax law, you're obliged to report all your earnings in whatever form, whether converted to ZAR or not. Fiat, crypto, cash or kind matters not. Mining can be deemed to be a commission earned on the provision of computing power. You have to declare a Rand value of everything for tax purposes. Wet van Transvaal. Period.
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Although, this does raise an interesting point. When have you earned anything. When you cash it out, or based on the value at tax year end?
 
I would think Rand value at end of tax period. That's the case with non-ZAR securities, for example. You might be asked to substantiate your ZAR valuation with transaction records, as the Act empowers them to demand, of course.
 
For tax purposes, your holdings in altcoin are no different to those in other more conventional currencies. Interest earned and exchange gains and losses are already well covered by tax law and practice notes from the past few decades, and crypto is no different.
 
Arthur said:
For tax purposes, your holdings in altcoin are no different to those in other more conventional currencies. Interest earned and exchange gains and losses are already well covered by tax law and practice notes from the past few decades, and crypto is no different.
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Then how does one go about doing this and the right thing? Do you work with SARS directly or get an accountant?
 
If you want to declare your income, then your expenses also need to be taken into consideration. So, do you only make a profit after your ROI?
 
Peon said:
Then how does one go about doing this and the right thing? Do you work with SARS directly or get an accountant?
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This. I'm all for being on the level as far as taxes are concerned, just not sure how to go about it.
 
Pakka said:
If you want to declare your income, then your expenses also need to be taken into consideration. So, do you only make a profit after your ROI?
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Only if you're deemed to be a trader or dealer, in which case your expenses in generating that income are deductible, as is the case with any normal business activity.

But if you're not doing it professionally, your expenses are not deductible - just as with any foreign bank account you happen to have.

Remember, as far as the taxman is concerned, there's no difference between altcoin and an offshore bank account in say US dollars or Mongolian tögrög.
 
Arthur said:
Only if you're deemed to be a trader or dealer, in which case your expenses in generating that income are deductible, as is the case with any normal business activity.

But if you're not doing it professionally, your expenses are not deductible - just as with any foreign bank account you happen to have.

Remember, as far as the taxman is concerned, there's no difference between altcoin and an offshore bank account in say US dollars or Mongolian tögrög.
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If I own a rock and William says he's willing to pay R100 for that rock then my rock is worth R100, it's still worth nothing to Sars.

Same with bitcoin it's not regulated. If I sell that rock and William gives me R100 then I need to declare that R100.
 
It's earnings minus costs. The thing is that it may cost you R100k which you make back this year so you pay no tax on it but next year you make R100k which you pay full tax on, assuming you're already paying tax. For this reason equipment is usually recorded as a capital investment which has a depreciated value deducted from it each year. When you sell it's selling cost minus depreciated value and the difference is then either added or deducted from your taxable income. The problem with mining however is that you're unlikely to be doing it for 3 years so depreciation doesn't help you much.

It's debatable whether you pay tax on the price at time of mining or on the final selling price. If it's on the price at mining you'll still pay tax on the final selling price as it's seen as an investment or trade. If you want to be compliant then no matter which way you choose get a formal agreement from SARS that they approve it.

How do you explain the money flowing into your account? You don't. SARS doesn't see your bank account.
 
Swa said:
It's earnings minus costs. The thing is that it may cost you R100k which you make back this year so you pay no tax on it but next year you make R100k which you pay full tax on, assuming you're already paying tax. For this reason equipment is usually recorded as a capital investment which has a depreciated value deducted from it each year. When you sell it's selling cost minus depreciated value and the difference is then either added or deducted from your taxable income. The problem with mining however is that you're unlikely to be doing it for 3 years so depreciation doesn't help you much.

It's debatable whether you pay tax on the price at time of mining or on the final selling price. If it's on the price at mining you'll still pay tax on the final selling price as it's seen as an investment or trade. If you want to be compliant then no matter which way you choose get a formal agreement from SARS that they approve it.

How do you explain the money flowing into your account? You don't. SARS doesn't see your bank account.
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Thanks, good info.
 
Arthur said:
Only if you're deemed to be a trader or dealer, in which case your expenses in generating that income are deductible, as is the case with any normal business activity.

But if you're not doing it professionally, your expenses are not deductible - just as with any foreign bank account you happen to have.

Remember, as far as the taxman is concerned, there's no difference between altcoin and an offshore bank account in say US dollars or Mongolian tögrög.
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Incorrect. Bitcoin isn't a currency but a commodity so it's the same as selling a bread or a pie. Also it doesn't matter what your profession is. Any business or activity you conduct on the side can have the expenses deducted from it. Indeed if he has a normal job as well he'll fall into two tax categories.

PS. Forgot to say electricity would be a current expense that's deducted right away.
 
Regulation by any government has nothing to do with it. That only affects provability and independent auditability, not tax liability. So personal honesty looms large.

No tax code I'm aware of restricts tax to trades in regulated or official currencies. If that were so, the world would long ago have switched to clamshells or other non-governmental tokens of exchange.
 
Swa said:
Incorrect. Bitcoin isn't a currency but a commodity
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Says who? SARS?

If I buy your house and pay you in mielies or pork belly futures or bitcoin or Rand, you're still liable for the same taxes.

The same goes if I buy your mielies or next year's pork bellies or bitcoin or Rand and pay in dollars or whatever.
 
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Arthur said:
Says who? SARS?



If I buy your house and pay you in mielies or pork belly futures or bitcoin or Rand, you're still liable for the same taxes.
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There are other tax implications specifically for currencies.

Currencies are therefore defined differently in the income tax act. Crypto currencies do not fall within this definition.
 
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