JOHANNESBURG - The South African Revenue Service (SARS) will soon provide clarity on the tax implications of transacting in cryptocurrencies like Bitcoin.
The tax regulatory, however, said while traders wait on guidelines, those who need to declare should do so now.
The use of Bitcoin has been rapidly growing in South Africa and it is so popular that people can pay with the cryptocurrency at certain spots.
SARS is treating cryptocurrencies under Capital Gains Tax, but it is an area it said it plans to explore further.
“Because by the very nature it lends itself to money laundering and anonymised trading, so yes we have to put in and place additional regulations. And to that end, we are going to release an interpretation note from our legal department to guide taxpayers as to their implications with respect to this Bitcoin technology," said the head of SARS' tax research, Randall Carolissen.
The revenue service said it is consulting with top technology companies in the world that are doing similar work.
SARS said it is very difficult to monitor blockchain technology and depending on what Bitcoin is used, it will determine how tax deductions are determined.
“Since it’s not legal tender it is treated as an asset in your hands. And depending on your intent with this asset, it can trigger different tax instruments. It can either be a revenue nature or it could be an asset, capital gains tax in nature,” Carolissen said.
Even though taxpayers are still waiting for the interpretation and guidelines of cryptocurrencies, SARS has urged all traders or buyers to declare where necessary.
“People need to come forward and regualise their tax affairs with us. And the guideline will also assist them with that. But as and when you submit your tax returns you must declare that as either additional income or additional asset revenue realisation that you’ve had. So it’s very important that you don’t discard that or ignore that part. Especially those people who took advantage of Bitcoin in the early stages.”
SARS is also liaising with the South African Reserve Bank to see how they can better match cross-border outflows and inflows of money so that people will have less room to hide things.