The South African Revenue Service (SARS) will not create new tax rules for cryptocurrencies but wants all earnings and losses from cryptocurrencies to be reported as assets under existing regulations.
Cryptocurrencies would be treated as «assets of an intangible nature» and would be subjected to existing capital gains and income tax rules as stated in the Income Tax Act, said SARS in its statement.
The tax agency expects all affected taxpayers in the region will declare any gains or losses arising from cryptocurrencies as part of their taxable income.
SARS listed three scenarios for posting cryptocurrency gains or losses:
- Digital currencies acquired through mining operations are considered «held as trading stock» until the user decides to barter or trade them for fiat currencies. Once bartered, the cryptocurrency would fall under the succeeding scenarios.
- Digital assets can be exchanged for local currency (or vice versa) by using cryptocurrency exchange platforms or through private transactions.
- «Normal barter transaction rules apply» when investors exchange a cryptocurrency either for goods or services.
SARS said it was still reviewing rules on how to apply value-added tax (VAT) on digital assets.