South Africa Crypto Tax Guide 2023

South Africa is ranked as one of the top 30 countries in the world for crypto adoption by Chainalysis. In South Africa, the use and ownership of crypto assets are subject to taxation under the country's tax laws. This means that individuals who buy, sell, or hold crypto assets may be required to declare their crypto-related activities on their tax returns and pay taxes on any profits or income earned from their crypto transactions. Understanding the tax rules and regulations for crypto in South Africa is important for individuals and businesses to avoid penalties and ensure compliance with the law.

Is crypto taxed In South Africa?

In short, Yes - crypto is taxed in South Africa.

In South Africa, The South African Revenue Service (SARS) treats crypto assets similarly to assets/trading stock and are subject to capital gains or income tax depending on the transaction.

How is crypto taxed in South Africa?

The guidance on crypto tax treatment in South Africa is very limited; however, it is clear that SARS does not treat cryptocurrency as legal tender. This means that crypto transactions may be taxable under capital gains or income tax, depending on the specific scenario.

Capital Gains Tax - If your crypto transactions have the nature of capital, they will fall under the capital gains component of your tax return. The first R40,000 gain every tax year is tax-free, and taxpayers will only pay tax on 40% of any gain above this, at a rate of up to 18%.

Income Tax - If your crypto transactions have the nature of revenue, they will fall under the income component of your tax return.

The tax treatment of crypto transactions in South Africa depends on whether the taxpayer is an individual or a legal entity. If the transactions are carried out by a legal entity, the applicable companies tax rate of 28% (or 27% for financial years starting on/after 31 March 2023) will be applied to an inclusion rate of 80% of crypto gains, minus the R40,000 exclusion.

Additionally, a single transaction may be considered as revenue, while another transaction may be viewed as capital gains. The tax treatment of your transactions also depends on whether your investment activities are considered holding assets as capital assets or trading stock. In other words, whether you are perceived as an individual investor or a trader.

Investor vs Trader Classification in South Africa

Whether an individual is considered an investor or a trader for tax purposes depends on their intentions and how they are viewed by the South African Revenue Service (SARS) at the time of the taxable event. There is no concrete rules set out by SARS to distinguish between investors and traders. It is highly recommended to seek out a tax professional to help you determine whether your activities will qualify you as an investor or trader.

In South Africa, investors who make capital gains from crypto transactions are eligible for an annual exclusion of R40,000. After this exclusion, 40% of any remaining gain is subject to tax for individual taxpayers. To calculate your taxable gains for the year, take your net capital gain - minus any losses and exclusions - and multiply it by 40%. This is the amount you will pay tax on, with a maximum effective tax rate of 18% for individual taxpayers.

On the other hand, traders who make revenue income from crypto transactions are not eligible for the annual exclusion and will be taxed on their entire profits at their marginal income tax rate. However, traders are allowed to deduct any expenses incurred directly related to generating the trading income.

Does SARS know about my crypto holdings?

The South African Revenue Service (SARS) has the ability to track and monitor crypto transactions through various methods, such as reporting requirements for crypto exchanges and businesses, data sharing agreements with other tax authorities, and the use of sophisticated data analytics tools.

SARS has stated that it will take a risk-based approach to crypto tax compliance and will focus on individuals and businesses with large or unusual crypto transactions. However, it is ultimately the responsibility of individuals and businesses to accurately report and declare their crypto-related activities on their tax returns. If non-compliance is discovered, penalties and interest will be charged.

What transactions trigger capital gains tax?

If an individual is seen as an investor by the South African Revenue Service (SARS) and disposes of a crypto asset, any profits from the transaction will be subject to capital gains tax. Disposing of a crypto asset can happen in a variety of ways, including:

• selling crypto for fiat currency
• swapping crypto for other crypto assets
• paying for goods and services with crypto
• gifting crypto (more information below)

If a profit is made from any of these disposals, the individual will be required to pay capital gains tax. The amount of tax owed will depend on the individual's circumstances and the specific details of the transaction.

Crypto income tax in South Africa

If SARS determines that your crypto transactions and activities have the nature of revenue, the entire profit from any disposal will be subject to income tax at the applicable marginal tax rate based on your total annual income. This means that your entire profits from transactions that could be considered capital disposals may be subject to income tax, including:

• selling crypto for fiat currency
• swapping crypto for other crypto assets
• paying for goods and services with crypto
• gifting crypto (more information below)

Additionally, SARS may consider certain crypto investment activities as revenue income and subject the entire proceeds to income tax upon receipt, such as:

• getting paid a salary in crypto
• mining rewards
• staking rewards
• airdrops
• various decentralized finance (DeFi) investment activities where you earn new coins or tokens
• creating and selling non-fungible tokens (NFTs) as an artist may also be considered revenue income
• royalties derived from NFT sales

Given the vague guidance from SARS on additional income from crypto, it is recommended to consult an accountant with specialised knowledge to help with calculating and filing your crypto taxes, particularly if you are using DeFi protocols.

The tax rate for an individual for income derived from crypto will depend on your total income from all sources. The brackets for individual taxpayers for the tax year: 1 March 2022 – 28 February 2023 are listed below:

When is the deadline to report my Crypto Taxes in South Africa?

The South African tax year runs from the **1st of March to the 28th of February ** the following year. The tax deadlines in South Africa vary depending on the type of tax and the taxpayer's filing status.

For individuals who are required to file a tax return, the deadline is 24 October of the following year. Individuals also need to consider provisional tax.

If an individual or entity is registered for provisional tax, the deadlines for making payments are as follows:

• The first payment is due on 31 August of the current tax year.
• The second payment is due on the last business day in February.
• The third payment for provisional tax in South Africa is voluntary and can be made on the following dates:
  • For companies with a year-end of the last day of February, and any other individual or entity (except for a company), the last business day of September.
  • In all other cases, within six months of the end of the tax year.

It is important to consult with the South African Revenue Service (SARS) or a tax advisor for the correct information on provisional tax payment deadlines.

How to file your crypto taxes in South Africa

Once you have calculated your crypto tax totals, the easiest way to file your taxes in South Africa is through the South African Revenue Service (SARS) eFiling system. On your tax return, you will see a section where you can declare capital gains on disposals made during the tax year, with specific reference to cryptocurrency. If you are a trader, there is another section for reporting income earned from crypto transactions. SARS eFiling allows you to easily and securely file your tax return online and track the status of your submission.

How Crypto Tax Calculator can help?

Manually maintaining records of all of the above doesn’t sound like much fun, does it? Spoiler: it’s not. That’s where we come in! Our crypto tax calculator software can help you aggregate your crypto transaction data to help calculate any gains, losses, income and expenses. As an added bonus, we’ve worked with tax professionals from South Africa to ensure our platform follows your region’s guidelines.

Once you’ve imported all your data to form a complete overview of your trading history, you’ll be prompted to reconcile any outstanding lines. After those are reconciled, you’ll have the option to download reports showing these values clearly. These reports and the information included will give you the amounts needed to complete your yearly tax return for SARS.