Crypto Tax Adviser

goocreations

Well-Known Member
Joined
Mar 6, 2009
Messages
155
#1
I'm currently earning my "salary" almost complete in crypto:

1. Mining (what tax is applicable here?)
2. Donations for open-source projects (probably non-taxable)
3. Small contract dev work and getting paid in crypto (probably income tax)
4. Crypto investment portfolio (probably capital gains tax)
5. Few other crypto income streams

I'm looking for a tax adviser that can help me determine how to pay tax. I tried SARS, and even though they want me to pay tax, they are completely useless in this case. I also want to establish a software development company (for the current dev work I'm doing) that will run completely on crypto. But now there are problems. For instance, there are no formal invoices or anything (the blockchain is the invoice). How will one get through a SARS company audit if there are no invoices or any of the traditional documents like bank statements, bills, invoices, etc?

Does someone know a good tax adviser, accountant, etc (preferably in Gauteng) that has knowledge about crypto?

And on a side note, if SARS is unable to give me exact guidelines on how and on what to pay crypto tax, and to accommodate the digital nature of crypto (eg blockchain as invoice), can they then legally force you to pay? Shouldn't the policies and laws be straightened out before they require you to pay tax? If a SARS employee sends me away saying they don't know whats going on with crypto (or even what crypto is), how can SARS then require me to pay tax on it?
 

Kuga

Expert Member
Joined
Nov 2, 2006
Messages
2,328
#2
SARS only cares about whatever crypto you cash out into ZAR. If you are only dealing in crypto to crypto transactions, then SARS can't do squat and will have no claim. I am no tax consultant, but this is what I was told.

1. Mining (what tax is applicable here?) - If you are mining and converting to fiat - this will be treated as income tax - if cashed out within 1 year. If hodling for > 1 year, CGT will apply.
2. Donations for open-source projects (probably non-taxable) - If it's paid in crypto, SARS can't touch it
3. Small contract dev work and getting paid in crypto (probably income tax) - Only taxable if converted to fiat, otherwise no tax
4. Crypto investment portfolio (probably capital gains tax) - same as above, SARS only taxes when converted to fiat
5. Few other crypto income streams - same as above.

In other words, if you have 50 000 BTC stored somewhere, and you cash out 10 BTC a month for living expenses, depending when it was purchased - if over a year old, 18% will apply for CGT. If it's under a year, then it's treated as income tax. SARS can't touch the BTC you have in storage. But having said that, if you were an early adopter and bought so much BTC, you'd only have to pay CGT every month
 
Last edited:

garp

Executive Member
Joined
Aug 2, 2004
Messages
6,489
#3
SARS only cares about whatever crypto you cash out into ZAR. If you are only dealing in crypto to crypto transactions, then SARS can't do squat and will have no claim. I am no tax consultant, but this is what I was told.

1. Mining (what tax is applicable here?) - If you are mining and converting to fiat - this will be treated as income tax
2. Donations for open-source projects (probably non-taxable) - If it's paid in crypto, SARS can't touch it
3. Small contract dev work and getting paid in crypto (probably income tax) - Only taxable if converted to fiat, otherwise no tax
4. Crypto investment portfolio (probably capital gains tax) - same as above, SARS only taxes when converted to fiat
5. Few other crypto income streams - same as above.

In other words, if you have 50 000 BTC stored somewhere, and you cash out 10 BTC a month for living expenses, depending when it was purchased - if over a year old, 18% will apply for CGT. If it's under a year, then it's treated as income tax. SARS can't touch the BTC you have in storage. But having said that, if you were an early adopter and bought so much BTC, you'd only have to pay CGT every month
I'm also not a tax consultant, but even many of the consultants seem mystified by this. I think you are mostly correct in your responses, but just to add:

1. Mining - if cashing in to FIAT then, yes income tax - or company tax if doing this as a company BUT you should be able to deduct your costs, i.e. the tax should only be on the profit portion. Be aware that purchasing anything with crypto is equivalent to cashing to FIAT from SARS' point of view.

2. Donations - technically probably incurs 20% donations tax over R100k - but if it's crypto to crypto it's going to be hard/impossible to to even account for.

3. Contract work - income tax - arguable whether only incurred if converting to FIAT, but in reality that is probably all that can be accounted for to SARS.

4. Crypto investments - capital gains tax incurred when you sell it for ZAR - but it depends how long you hold it. If you frequently buy and sell after periods shorter than a year, SARS will most likely consider the profit to be income not capital gains.

5. Income streams - depends what you do with it.

Just be thankful we're not like the US IRS that considers every crypto-crypto transaction a taxable event. So even if you did something like swap some BTC for ETH, they want a record of the transaction and the USD values at the time and tax on the change in USD value of the BTC since it was bought. This is why so many crypt exchanges just blanket block US customers as the reporting is too onerous.

One of the issues I've encountered is that even if you are willing to be 100% compliant, there is often simply no practical way to actually account for hundreds of transactions in different cryptos on different wallets adn exchanges - e.g. how do you show SARS what the balance is of your wallet if it exists only as a key in your head - how do you show what you received or spent crypto if all you have is a transaction hash, lol.
 

goocreations

Well-Known Member
Joined
Mar 6, 2009
Messages
155
#4
Thanks for the feedback. I'm going to cash out to Fiat, at least some of it. I wish I could pay rent, groceries, etc in crypto, but currently it has to be Fiat.

I just don't want to end up in court in 10 years time, especially with the company I want to create, because I missed a few clauses in the tax law. Just want to make double sure I'm on the safe side.
 

bchip

Senior Member
Joined
Mar 12, 2013
Messages
725
#7
The advise given in this thread is really wrong...
There is nothing in the Income tax act that sais that "Income that only cometh from Rands is taxable"

The income tax act in SA refers to Gross income of any form or shape from across the world
to a South African tax resident is taxable and needs to be declared.
The advise here is equivalent to saying, if you were paid in US dollars you dont need to declare
it until it becomes Rands...

http://www.sars.gov.za/Media/MediaR...n-the-tax-treatment-of-cryptocurrencies-.aspx

PRETORIA, 06 April 2018 - The South African Revenue Service (SARS) will continue to apply normal income tax rules to cryptocurrencies and will expect affected taxpayers to declare cryptocurrency gains or losses as part of their taxable income.


Rather go see a professional.
 
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