The South African Revenue Service (SARS) tightens its regulations on the taxation of digital assets such as cryptocurrencies up to 45%.
From a recent report from a South African business journal, the South African Revenue Service (SARS) intends to tighten their policy on crypto taxation. For South Africans taxpayers this means their intentions while holding crypto, determines whether their holdings and gains are revenue or capital.
Holding intentions, according to the measure, depend on the length of holding and the frequency of trades. For those which register as gains they can be taxed at a maximum of 45% and capital at a maximum of 18%.
Local law firm Webber Wentzel commented on the change, saying SARS is “increasingly auditing taxpayers’ crypto holding and trading activities.” They also mentioned the request of information from exchanges, “It has also requested information from certain South African crypto exchanges, including Luno, about users on the platform and their transactions.”
As defined by the Income Tax Act, crypto is a “financial instrument” rather than a “currency”. This specificity of the definition of crypto allows for regulators to treat crypto assets otherwise compared to traditional monetary assets.
Webber Wentzel advises crypto investors in SA on the increased practicality of using two separate wallets for trading and holding crypto.
South Africa continues crypto rules
Since late last year, crypto news out of South Africa has seen an incremental increase in the types of regulations and red tape for crypto holders in the country.
As with many other countries across the global, more recently SA regulators revealed a more serious stance on regulations and taxes. In June the South African Reserve Bank (SARB) stated that crypto investors in country could no longer use cross-border or foreign exchange transfers to buy crypto assets.
Despite not actually overseeing crypto assets, SARB’s statement foreshadowed an overall attitude towards digital currencies. In the same month, financial groups within the country called for the regulation of cryptocurrencies by official governmental entities.
As regulations around the world become more stringent towards digital assets, lawmakers in South Africa will be faced with the decision of how to act towards crypto.
Currently, regulators in the U.S. are pushing through a bipartisan bill which will determine the future of taxation and reporting for the crypto industry in the States.