Share

How Bitcoin earnings are still taxable

accreditation
(iStock)
(iStock)

Johannesburg – Cryptocurrencies like Bitcoin are to be treated in the same way as capital realisation on assets, according to Dr Randall Carolissen, research head of the South African Revenue Service (SARS).

He was speaking at a briefing on the Tax Statistics 2017 report earlier this week.

During a question and answer session, Carolissen shared how the tax authority was dealing with cryptocurrency.

The value of Bitcoin has grown more than 2 000% over the past year. In December last year a Bitcoin was worth R11 000. It is currently worth over R220 000.

Individuals have the option to buy fragments of a Bitcoin if they can’t afford a single unit.

Using an example of how Bitcoin can be taxed, Carolissen explained that like a Krugerrand which is sold, the capital appreciation on it will be taxed as capital gains tax.

Carolissen said that SARS is also negotiating with international counterparts on finding ways to track flows of the cryptocurrency, which is appealing because of its anonymity. “We are in talks with top technology companies in the world doing similar work in Canada and the UK. We are hoping to get that technology also.”

SARS is also stepping up its relationship with the Reserve Bank to strengthen tracking the flow of funds, as arbitrage can also be hidden through the movement of goods.

Jerry Botha, managing partner at Tax Consulting, differentiated between income tax and Capital Gains Tax liability. He explained that if there is intention to trade Bitcoin to make profit in the short term, then the profit can be treated under income tax rules.

If the Bitcoin is held as an asset for a number of years then it is treated with rules pertaining to Capital Gains Tax.

Botha further explained it is unlikely SARS would introduce a separate tax for cryptocurrency as the income tax laws are comprehensive enough to apply to cryptocurrency.

Nothing new to taxing Bitcoin

Steven Ambrose, CEO of Strategy Worx Consulting, explained to Fin24 that profits made on the buying and selling of Bitcoin falls within normal tax rules. “There is nothing different about it and there’s nothing special about taxing profits made on Bitcoin.”

The taxation is easy to manage, as the profit will have to be converted to rand at some point. “You can’t tax Bitcoin while it remains Bitcoin.”

“What a lot of people don’t understand is Bitcoin is not money. It is a commodity closer to gold than it is to rand.”

When asked if there may be progress in regulation of the cryptocurrency, Ambrose explained that legislation always lags behind technology. But governments are looking to regulate the Bitcoin environment in the same way they regulate gold.

“But no government is in control of Bitcoin. That’s half of its attraction, maybe even 80% of its attraction.”

Once Bitcoin, which currently exists in cyber space, comes into the real world then normal rules and regulations will apply.

“The danger of unregulated markets like Bitcoin is that there are tons of scams and people getting caught with no security around it… Bitcoin is less regulated and because of that risks are higher.”


* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.96
-0.3%
Rand - Pound
23.95
-0.2%
Rand - Euro
20.47
-0.0%
Rand - Aus dollar
12.36
-0.1%
Rand - Yen
0.13
-0.3%
Platinum
911.00
+1.6%
Palladium
1,012.02
+1.0%
Gold
2,213.44
+0.9%
Silver
24.79
+0.6%
Brent Crude
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.9%
Resource 10
57,251
+2.9%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders