Cryptocurrencies are becoming more prevalent to residents living in South Africa and over the past year bitcoin interest stemming from the region has grown exponentially. Furthermore, just recently the South African Treasury has proposed a few amendments that apply to the country’s Taxation Laws Amendment Bill (TLAB) and how cryptocurrencies are taxed. According to regional reports, if the proposals are accepted, bitcoin trades could be exempt from value-added tax (VAT) in South Africa.
South African Treasury Proposals Could Make Bitcoin Trades Exempt from Value-Added Tax Laws
Interest in bitcoin and other digital assets within South Africa has been rising steadily over the past few years. Back in April, the South African Revenue Service (SARS) revealed its latest guidelines towards cryptocurrency taxation and explained that taxpayers must declare profits and losses if the funds stem from digital asset transactions. SARS details that taxpayers who are uncertain about their tax filings involving cryptocurrencies may reach out to the tax entity for guidance.
“The onus is on taxpayers to declare all cryptocurrency-related taxable income in the tax year. Failure to do so could result in interest and penalties,” said SARS on April 6, 2018.
Now the members of the South African Treasury have proposed new guidelines that could make trading bitcoin and other virtual currencies exempt from VAT. Regional reports detail that the proposals aim to change the definition that digital assets are deemed taxable financial instruments, the clarity within the country’s VAT Act, as well as loss provisions of the Income Tax Act. A senior tax consultant from Mazars, Tertius Troost, explains to regional publications that the proposals will make things much clearer for individual cryptocurrency tax filings and how they apply to the VAT Act.
“The clarification of the VAT treatment will be well received, especially on the basis that the issue, acquisition, collection, buying or selling or transfer of ownership of any cryptocurrency will be included under the definition of financial services in terms of section 2 of the VAT Act,” Troost said in an interview.
If accepted, all dealings in cryptocurrencies will be exempt from VAT. This means there will be no VAT input claims on the acquisition of cryptocurrencies, and no VAT output being levied on the disposal of cryptocurrencies.
Cryptocurrency Interest Continues to Trend Higher in South Africa
Troost also says that VAT costs associated with mining might not have to be claimed within tax filing associated with the VAT. However, the tax consultant says “the good news seems to end there.” Troost emphasizes that the Treasury has proposed the acquisition or disposal of any cryptocurrency under the ring-fencing of assessed loss provisions which is sometimes called ‘suspect trades.’ This means some cryptocurrency sales may not be able to offset losses in certain instances. “In other words, these losses are ring-fenced to be used only against future profits earned from cryptocurrencies,” Troost concludes.
Digital currencies have been very popular within the South African region which has caused tax officials to scrutinize cryptocurrency dealings. Additionally, Localbitcoins and Paxful volumes in South Africa have been increasing steadily over the past few weeks. Interest in bitcoin is higher than every global region. As Google Trends reports, South Africa is the number one area in the world searching for ‘bitcoin-related’ queries.
Moreover, cryptocurrency automated teller machines (ATMs) have become more prevalent in the daily lives of South Africans. There are now ATMs in Johannesburg, Nelspruit, Cape Town, and Midrand.
What do you think about the South African Treasury’s proposals? Let us know what you think about this subject in the comment section below.
Images via Shutterstock, Mybroadband.co.za, and Pixabay.
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