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Over the past 10 years there has been an increasing interest in a new form of currency that is/was set to have as much of an impact on the world of transactions as that of the invention of the credit card or even of currency itself. Bitcoin, and the almost 2,000 other cryptocurrencies have moved out of the basements of computer programmers into the mainstream world, as the ease of use and almost meteoric value growth have made even the more sceptical amongst us take note. What was once something only a handful of people knew about, and even then, linked intrinsically to the underworld and dark web, is now something that you can use to purchase nappies online with the click of a button.
Bitcoin began as a white paper created in January 2009 (that’s right…it’s not even 10 years old) and it’s been a literal flood of ‘ICOs’ being launched since then. It was designed to be a form of ‘digital money’ that allowed peer-to-peer transfers without needing the involvement of banks or governments. Cryptos were unregulated, were not linked to any country or any one regular currency such as US Dollar, Pound, Yen or Rand.
It was an ideal solution to the distrust that resulted from the global crash of 2008 and was a great way for the common man to take back their financial ownership and control.
As the interest in, and ease of access to cryptocurrencies grew, so did the values. Two years before the time of writing this (April 2016), the value of one Bitcoin was R 6,142. A year later (April 2017) it was R 15,505. By December of 2017 you would have to pay R 259,152 for a Bitcoin. As with anything that volatile, the lows come as quickly and as brutally as the highs, and at the time of writing this, one Bitcoin is sitting at R81,532.
TAX & CRYPTOCURRENCIES
SARS have clarified that cryptocurrencies are not regarded (by SARS) as a currency for income tax purposes or Capital Gains Tax (CGT) but are actually regarded as assets of an intangible nature.
“Whilst not constituting cash, cryptocurrencies can be valued to ascertain an amount received or accrued as envisaged in the definition of “gross income” in the Act,” SARS said. “Following normal income tax rules, income received or accrued from cryptocurrency transactions can be taxed on revenue account under “gross income.
SARS said that taxpayers are entitled to claim expenses associated with cryptocurrency accruals or receipts, provided such expenditure is incurred in the production of the taxpayer’s income and for purposes of trade.
As with any tax related to growth of value or income, the opposite it true. You can declare your losses that result from a drop in the value of your cryptocurrencies
SARS clarified that the onus is on the taxpayer to declare all cryptocurrency-related taxable income in the tax year in which it’s accrued or received. Naturally they stressed that failure to do so could result in interest or penalties.
So, even thought there is very little way to track ownership at this point, SARS are expecting you, the tax payer, to play open cards and add any gains or losses to your tax returns.