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Bitcoin Tax to Come to South Africa in Early 2018



bitcoin tax south africa

As bitcoin continues to gain momentum in South Africa, taxpayers will need to prepare themselves for an increased probe into their cryptocurrency gains declarations. This is after the South African Revenue Service (SARS) confirmed that it will explain its position on the tax treatment for virtual currencies in early 2018 but SARS’ stand on digital currencies will not be published before the February Budget Speech.

Despite a price decrease in mid-December, bitcoin was still trading at more than 750 percent higher on than it was only one year ago. 2017 was essentially the year that bitcoin became mainstream as an investment, which has led to this incredible increase in value. However, as tax authorities have started to eye this development, taxpayers involved with cryptocurrencies could face a higher tax bill in 2018 if they have taken profits on their crypto asset investments in the past year.

SARS Interest in Tracking Digital Currencies

In mid-2017, the South African Reserve Bank (SARB) stated that they would test a regulatory framework for bitcoin and other virtual currencies. In December 2017, SARS would also show interest in working with SARB and top technology firms to research ways of tracking cryptocurrencies to have all investment profits from cryptocurrencies taxed in an effective manner.

To audit the money gained from cryptocurrencies in recent years, SARS will need close to two years to perform a detailed investigation. Any taxpayers that intentionally omits to declare their gains or profits will end up paying penalties of up to 200 percent and interest, said the Managing Director for Tax and Exchange Control at the Geneva Management Group, Ruaan van Eeden.

“The fact that SARS hopes to provide guidance on the tax treatment of cryptocurrencies soon, suggests that it plans to scrutinise this space much more carefully,” adds, CA(SA) and Senior Lecturer in the School of Accountancy at the University of the Witwatersrand, Asheer Jaywant Ram.

The South African tax authority finds itself under pressure to increase its tax collection efforts after the Medium-Term Budget Policy Statement (MTBPS) reported that the tax revenue was expected to drop by almost R51 billion short of the budget estimates of 2017. Attempts to establish free tertiary education and stabilise Eskom – the struggling power utility – is expected to increase pressure on the fiscus. Still, it is not clear whether there is an outstanding amount of money hidden in the crypto space and if so, how much.

“I think there is enough interest and there is enough scope for SARS to be looking into this space, but now the question becomes – because SARS is really under pressure to reduce that deficit – are they really going to accept taxpayers declaring their gains as capital gains tax or are they going to just say it is all revenue in nature?” asked Ram.

SARS’ Challenge

The main challenge SARS will face is explaining to taxpayers whether gains will be construed as income instead of capital. If they do not go with the latter, taxpayers will be forced to pay higher tax rates. While SARS might define gains are income, people might argue that their gain are capital gains depending on the facts. If gains are capital gains in nature, the capital gains tax would apply. However, if it is seen as income, the cryptocurrency price fluctuation gains will get taxed at the taxpayer’s marginal income tax rate.

“Those sorts of debates on the nature of bitcoin – I think those are coming – and I think it would be very interesting to actually see the outcome of those debates. The main challenge in trying to determine a bitcoin trader or investor’s tax liability is the question around the nature of the bitcoin,” said Ram.

Van Eeden remarked by saying that bitcoin’s obscure nature and how it functions creates uncertainty on its tax treatment. Moreover, there is lack of clarity on whether bitcoin is an asset or a currency as this varies from one jurisdiction to the other. As such, the different classifications have an immense implication for its taxation. While most jurisdictions see it as an asset, some – like Japan – see it as a currency and have categorised it as a legal payment method.

Is Bitcoin an Asset or a Currency?

report by Robert Gad, Nicolette Smit, Megan McCormack, Jo-Paula Roman from the tax department at ENSafrica that considers South Africa’s position on bitcoin, states:

“Where bitcoin is used as consideration for the supply of goods or services, and it is determined that bitcoin may be viewed as an asset rather than currency for VAT, the trade would likely be akin to a barter transaction.”

“Where bitcoin is traded – i.e. bought and sold for cash – the VAT consequences for both parties would depend on a detailed analysis of the exact facts of each case. This would be of particular relevance to taxpayers that may exceed the VAT registration threshold through their bitcoin trades,” the report continues.

Businesses are expected to register for VAT if the total value of the taxable supplies in any twelve-month period is expected to surpass R1 million. Still, in jurisdictions that bitcoin is viewed as an asset – having VAT consequences when bought or sold using an enterprise – there are territories that exempt it from both their VAT as well as the Good and Services Tax (GST) rule.

A good example is in Australia where bitcoin is seen as an asset, but the Australian Tax Office has not levied any GST on the purchase and sale of cryptocurrencies since July 1, 2017, making it lack consistency since it remains a capital gains asset for tax purposes, noted Ram.

This shows the ostensible nature of bitcoin, which is seen as a currency and an asset at the same time. While there are doubts on whether the international jurisdictions will consent to a uniform measure when it comes to regulating bitcoin, the German Central Bank has already called for a global regulation regarding digital currencies.

As SARS is closing in on finalising tax regulations for bitcoin in South Africa, it will not only be the first country in Africa to do so but may also end up providing a tax framework that other African nations with large cryptocurrency communities could adopt.


Bitcoin Wallet Luno Adds SegWit Support to Lower Transaction Fees



Luno Adds SegWit Support

Luno, one of the most popular bitcoin wallets in Africa, has announced full SegWit integration for bitcoin send and receive transactions. Previously, Luno customers could only receive BTC through a legacy wallet address, which was not integrated with the recent Bitcoin blockchain upgrade SegWit. Only send transactions were SegWit compatible.

With the full integration of SegWit, Luno users can now enjoy cheaper and faster bitcoin transactions.

“By implementing SegWit internally, Luno has managed to reduce the send fees paid by customers by over 25% already. As customers start switching over to new SegWit addresses, this will translate into a further reduction in sending fees in the coming weeks and months,” Werner van Rooyen, head of marketing and communications at Luno stated.

Luno currently operates in South Africa, Nigeria, Malaysia, UK, and in 35 other European countries.

What is SegWit?

Segregated Witness (SegWit) was an upgrade to the Bitcoin blockchain that is intended to address Bitcoin’s scalability challenges as well as fix the issue of transaction malleability. With SegWit, signature data is separated from transaction data in order to enable more transactions to fit into each block. The signature data is kept in an extended block called the witness. As a result, bitcoin transactions become faster and transaction fees become lower.

In theory, the Bitcoin network can handle seven transactions per second. However, in reality, it is around four transactions per second. With the number of bitcoin transactions increasing as bitcoin’s popularity grows, transactions take longer as the unconfirmed transactions pool increases. Therefore, bitcoin users who can afford it have been paying higher transaction fees to incentivise miners to prioritise their transactions and, thereby, increase the speed of their transactions. At the end of 2017, this has led to the average bitcoin transaction fee spiking to over 35 dollars.

However, when SegWit addresses are used, bitcoin transactions become faster and the required resources decrease as well. Consequently, the transaction fees reduce.

How Can You Add a SegWit Wallet Address on Luno?

To add a SegWit address on the Luno wallet you have to follow these steps:

  • Open your Luno account either on the mobile app or the web app
  • Choose “wallets” from the menu
  • Click on your “BTC wallet”
  • Choose “receive bitcoin”
  • Click “add address” and follow the prompt

To receive bitcoin, use your SegWit bitcoin receive address. Legacy bitcoin addresses begin with 1 while SegWit bitcoin addresses begin with 3. Even after adding a SegWit wallet address, bitcoins sent to your previous legacy bitcoin address will still work. In addition, you can still send bitcoin from a SegWit wallet to a legacy wallet and vice versa since the transactions are still taking place on the same blockchain. But if you are sending bitcoins to and from a SegWit wallet, you can benefit from reduced fees.

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Bitmart Opens Cryptocurrency Mining Hardware Store in South Africa



Bitmart Opens Cryptocurrency Mining Hardware Store

Bitmart, South Africa’s leading supplier of mining hardware, has opened a cryptocurrency mining hardware store in South Africa. This makes Bitmart’s retail outlet the first cryptocurrency mining store in Africa.

Products and Services Offered by Bitmart

Bitmart was founded by CEO Jacques Serfontein in 2015 to offer cryptocurrency mining hardware to South Africans. Currently, Bitmart offers GPU rigs, ASIC miners, GPU rig mining software, graphics cards, international mining rig monitor app, cryptomatic watches, hardware wallets, and motherboards. Customers can find GPU mining rigs that mine cryptocurrencies such as zcash, monero, decred, bitcoin, and litecoin.

Additionally, Bitmart provides services such as bitcoin mining farm design and deployment, mining training, antminer repair tickets, mining farm management using Genesis Hive, and shepherd services.

Through its shepherd services, Bitmart helps owners of second-hand miners to find buyers. Therefore, both sellers and buyers are assured of safe and secure transactions through Bitmart’s SSL-secured online shop.

According to MyBroadband, Bitmart is an authorised distributor of Avalon Miners, Genesis Hive, Trezor, Ledger wallets, KeepKey, and UniSat (satellite mining solutions) in Africa.

The company also supplies mining hardware to countries such as Japan, Dubai, North America, Australia, and England.

What Does Bitmart Plan for the Future?

Bitmart will be holding seminars in Johannesburg and Mbombela. The seminars will focus on bitcoin basics and advanced cryptocurrency trading. In addition, Bitmart will be introducing a satellite mining connection in partnership with Uniwisp that will allow mining rigs to mine from any place in the world. Uniwisp is an Internet service provider based in Nelspruit, South Africa.


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Kenya’s BitPesa Acquires Spanish Money Transfer Platform TransferZero



BitPesa Acquires TransferZero

On February 8, 2018, BitPesa announced that it has acquired TransferZero, a Madrid-based online money transfer platform, which operates in over 200 countries using more than 50 currencies.

Why Did BitPesa Acquire TransferZero?

BitPesa, which is already operating in Africa and Europe, will be able to “set deep roots to UK and European licensing, bank accounts, and integrations” through this acquisition, according to the company’s statement on its blog.

“Europe is a hub for global remittance and payments companies. Digital currencies and decentralized technology have hit critical mass in the financial services and payments space. It is no longer a question of whether this technology will have staying power [but] which specific technology and what product iteration will launch and scale first […],” Elizabeth Rosiello, founder and CEO BitPesa said.

“BitPesa has the support of top-tier, institutional investors and a network that will help to bring TransferZero’s technology to the next level. With this support, we will be able to provide even more efficient transfers and user experience,” Luis Cambronero, former TransferZero CEO and present Managing Director, BitPesa stated.

Setting Up Infrastructure Across Europe and Africa is a Priority

“Setting up infrastructure across Europe and Africa has always been a focus of ours. […] We’ve just doubled our bank accounts, our infrastructure, and it’s licensed by the Bank of Spain as a payment institution. So we are fully compliant with PSD2 regulations […],” Rosiello said.

“This is truly a partnership where the whole is greater than the sum of the parts, allowing BitPesa to solidify our leadership in this space. By bringing our regional and technological expertise together, we will further accelerate our month-to-month growth,” Rossiello asserted.

TransferZero will neither change its name nor its headquarters. In addition, its employees will remain with Bitpesa.

This acquisition from an Africa-based bitcoin startup of a European fintech startup shows that leading African startups can make waves beyond the borders of the continent and create a positive impact on a global scale.

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