A gain on the disposal of crypto assets may be taxed as either revenue or capital, in line with the same income tax rules that apply to the disposal of shares or unit trusts, says Joon Chong, partner at law firm Webber Wentzel.
The gyrations of cryptocurrency markets have delivered a first wake-up call to crypto traders and investors who thought it was an easy way to make money. The second alarm is about to go off as SARS is looking at how to tax all possible crypto activities.
In South Africa, the term crypto asset, not cryptocurrency, is used as the SA regulatory framework moves towards uniformity. The disposal of crypto assets is a taxable event. The purchase of goods or services using cryptocurrencies results in the disposal of crypto assets with proceeds equal to the market value of the goods or services acquired. The disposal of the crypto assets thus triggers tax payable and a cash outflow.
1a) AB sold because he needed the funds to repair his car when he had an accident. AB had a small loss but was glad to recover most of the capital put down. A third party, namely the exchange, is given the right to dispose of the coins. In contrast, coins stored in a personal wallet cannot easily be traded.
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