If you have made money from the recent Bitcoin boom and want to cash out, you will need to pay tax on your earnings.
Due to the unregulated nature of cryptocurrency, though, you may ask how much tax you’ll have to pay and how it can be traced.
MyBroadband spoke to South African Bitcoin exchange Luno, blockchain expert Simon Dingle, and the SARS and SARB about tax on Bitcoin earnings.
Bitcoin exchange Luno states it has high compliance standards with local and international laws and regulations around the world.
Luno Head of Growth Werner van Rooyen said Bitcoin recipients must consult with a registered tax professional regarding tax on their Bitcoin earnings.
”There are various factors that could impact taxes an individual owes to the tax authorities,” said van Rooyen.
“The short answer is that all income is taxable in South Africa and it is the responsibility of individuals to remain tax compliant.”
Luno said it has simplified Bitcoin payments for businesses by partnering with platforms like PayFast and Bidorbuy in South Africa.
When someone pays a partner merchant in Bitcoin, Luno automatically converts Bitcoin into rand to simplify the accounting for the merchant.
Van Rooyen said businesses must also consult with a tax professional if they accept Bitcoin in exchange for goods or services.
Blockchain expert Simon Dingle said that when exchanging Bitcoin for rand, the same taxes apply as any other asset disposal.
“It may trigger a capital gains event, or could qualify as income for active traders,” he said.
“All assets are treated equally in terms of tax.”
Dingle said the South African regulator is one of the more progressive in the world when it comes to blockchain technology.
“That said, they have not ratified virtual currencies in a way that, for example, the Japanese regulator has.”
SARS and SARB
The South African Revenue Service said transactions or speculation in Bitcoin are subject to the general principles of South African tax law and are taxed accordingly.
This applies to income generated from trading cryptocurrency.
SARS did not specify the tax requirements for specific Bitcoin-to-rand transactions and said it does not accept payment in Bitcoin.
The South African Reserve Bank referred MyBroadband to its position paper published in 2014 when asked about Bitcoin tax and regulation in the country.
The paper outlines the numerous risks of the use of decentralised currencies such as Bitcoin, including the potential to “exert significant competitive pressure on existing payment systems”.