A new draft of South African crypto regulations has been written by the South Africa Revenue Service (SARS), which is set to define a new framework for the taxation of digital currencies in the nation.
The move to implement new South African crypto regulations to control tax is similar to what we are seeing across the entirety of the crypto-sphere as governments and regulatory bodies look to get a firm grip on the industry. This comes at a time when the South African crypto industry is rapidly expanding.
New South African crypto regulations drafted
The new drafts of South African crypto regulations on taxation follow on from the issues raised in April 2018 by the South Africa Revenue Service (SARS), who laid out their plans to tax those who earned income with digital currencies.
The statement in a press conference from SARS back in April originally laid out their intention regarding the new regulations:
“In South Africa, the word ‘currency; is not defined in the Income Tax Act (the Act). Cryptocurrencies are neither official South African tender nor widely used and accepted in South Africa as a medium of payment or exchange. As such, cryptocurrencies are not regarded by SARS as a currency for income tax purposes or Capital Gains Tax (CGT). Instead, cryptocurrencies are regarded by SARS as assets of an intangible nature.”
The new drafts have stated that virtual currencies such as bitcoin will now be classed as intangible assets and are now subject to taxation. If SARS manage to get the draft through, these South African crypto regulations on tax will force local crypto users to declare how much income they are making via crypto.
The new draft defines the crypto tax framework that some will believe goes against the entire ethos of crypto being anonymous in the first place and will be met with a hardline stance in some quarters of the industry.
Crypto transactions in S.A. exempt from VAT?
The draft of these new South African crypto regulations on tax also stipulates that transactions in crypto are exempt from value-added tax (VAT), which is a move that at least shows some leniency. SARS has made this decision because it believes that crypto transactions are separate from financial service transfers. Crypto users in South Africa can rest assured that if the bill is passed, digital tokens will not incur VAT.
Although still in its draft stage, law representatives of the Johannesburg-based law firm, Hogan Lovells, reckon that the new South African crypto regulations on tax will not have such a detrimental impact on the local crypto industry by saying that:
“The proposed changes will have a limited effect, if at all, on the day to day use of cryptocurrencies. For the consumer, the proposal means that the consumer will not have to charge or collect any VAT when undertaking any transaction in respect of any cryptocurrency. The benefit of this is that there will not be any additional VAT charge which would increase the costs associated with transacting with cryptocurrencies.”
Although it is easy to surmise that local crypto users will not be too affected by the new South African crypto regulations on tax, some will see this as a negative for the anonymity of crypto users in the African nation.
I am very experienced writer/blogger who has been an active member of the cryptocurrency community for several years. I have experience writing for crypto news sites and proactively been involved in the startup of other ICO and crypto ventures over the course of the past four years.