Blockstarters Breakfast - Cryptocurrency and Tax in South Africa

kiligirl (66)in #crypto • 6 years ago

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...said no-one ever.

This is more how we see paying taxes -

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And when it comes to crypto and taxes....

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It's a mystery for most of us how the taxman (in this country, the South African Revenue Service, or SARS) is going to treat crypto related, er, earnings. Or purchases. Or proceeds. Or transactions. Or....

Blockstarters to the rescue!

As I've written about a couple of times now (see links below) @tim-beck, @wesleybeckza and I are now attending these breakfast talks hosted every second week by Blockstarters.

Today's talk was about a subject near and dear to everyone's pocket, Cryptocurrency and Tax in South Africa.

Eish, it's complicated, because somebody in SARS defined crypto as a financial instrument rather than a token, and that sends our friendly taxman down a rabbit hole.

Lucky for us in the South African crypto world, there are humans out there willing and able to demystify to the extent possible this complex and unpleasant challenge. Blockstarters invited an experienced corporate tax attorney from one of Johannesburg's top international law firms to untangle the web of mysteries for us.

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The beef

Without reproducing his presentation, in summary the situation is:

the onus is on the taxpayer to report fully and truthfully
SARS could decide to implement retroactive measures (see first point above)
short term transactions will be treated as income, therefore will be subject to income tax
crypto bought and held for more than a year (timeframe for now) will be treated as an investment, therefore subject to capital gains tax (CGT)
there's still no clarity over how to deal with utility tokens, as all tokens have been defined as financial instruments...even if they're not
- this sparked an interesting comparison with loyalty programmes, which harbour significant value and yet are not taxed
those who are not sure about how to report their crypto activities to SARS should get a written professional opinion and act on it (again, see the first point above), so if SARS comes knocking they can at least refer to the opinion
the exchanges (in South Africa, the main one is Luno) are probably reporting to SARS already, although nobody in the room could say for sure
there's still much uncertainty over how SARS would handle the account of someone who engages in significant trading, so they'll probably treat it the same way they treat share trading (considering some sort of weighted average approach)
if someone applies skills and resources (in a way similar to the way a professional gambler would, compared to an amateur) to mitigate risk and optimise their trading results, then these will likely be treated as income than investment returns
VAT was an interesting one:
- if you buy a product with crypto and resell it - you can't claim the VAT because you didn't buy it with ZAR (makes sense once you think about it)
- good news: there's no VAT on crypto trading, so if you sell the product for a crypto equivalent of ZAR then trade the crypto back into ZAR, at least you incur no VAT on the currency trade
...and much more. When I get the YouTube link, I'll post it. And if anyone else who was there remembers the detail better, please chime in!

Out of the three breakfasts we've attended so far, this one was characterised by the most lively debate and discussion. I think the speaker managed to get five minutes into his talk uninterrupted before the room started to pitch in, and the conversation continued in a lively way for probably an hour and a half. When a topic comes close to the wallet, the mind applies itself.