Linkedin
Facebook
Email
more
Tax treatment of crypto assets
Section 1 of the Income Tax No.58 of 1962 (“The Tax Act”) includes “any crypto asset” under the definition of a financial instrument.
While the Tax Act does not detail any specific tax treatment of crypto asset transactions, SARS has indicated that normal income tax rules will apply to crypto assets and affected taxpayers would need to declare crypto assets gains or losses as part of their taxable income. At present, the onus is on the taxpayer to declare their income from crypto asset transactions.
Read our previous article – Tax on digital assets
With the rapid growth in the digital asset market and significant volume of trades, together with the anonymity associated with blockchain, there is a concern that existing international tax transparency models like Common Reporting Standards (“CRS”) are being undermined and are insufficient, and that the potential for tax evasion, money laundering and the use of digital assets in other criminal activities will only increase.
In response, the OECD has developed the Crypto-Asset Reporting Framework (“CARF”) which allows for the reporting and sharing of digital asset transactions amongst tax jurisdictions in a standardised manner.
CARF is therefore intended to provide transparency of digital asset transactions among tax jurisdictions and will allow revenue authorities to collect data from resident crypto-asset intermediaries and exchanges that effect digital asset transactions on behalf of their clients.
On 10 November 2023, South Africa together with 46 other countries, issued a joint media statement announcing their intention to implement CARF “in time for exchanges to commence by 2027”.
At present, the following four types of transactions would be reportable under CARF:
- Exchanges between crypto assets and fiat currency
- Exchanges between crypto assets
- Where crypto assets are used for the payment of goods and services, but only where the value of the transaction exceeds
- $50 000.00
- Transfers of crypto assets
CARF would place the obligation of reporting crypto assets trades on the crypto asset providers and it is intended to function much like how financial institutions currently report information to SARS.
CARF is essentially looking to bring crypto anonymity to an end and taxpayers are encouraged to honestly declare their crypto asset transactions when completing their tax returns to avoid any penalties in the future, when CARF is implemented.
