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South African Revenue Service Proposes Cryptocurrency Tax Regulations

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cryptocurrency tax regulations

The South African Revenue Service (SARS) has recommended draft regulations that will guide how cryptocurrency tax will be applied in the country. In April this year, SARS introduced cryptocurrency tax laws requiring South Africans to pay income and capital gains taxes.

“The onus is on taxpayers to declare all cryptocurrency-related taxable income in the tax year in which it is received or accrued. Failure to do so could result in interest and penalties,” SARS said in a statement dated April.

During that time, the revenue body said it would use the existing tax framework to guide the taxation of cryptocurrencies as opposed to creating a new one.

In South Africa, cryptocurrencies are regarded as intangible assets instead of currencies because the Income Tax Act in the country has not defined the word ‘currency.’

The Proposed Draft Regulations

cryptocurrency tax regulationsIn the proposed draft regulations, SARS will still consider cryptocurrencies as intangible assets. That means that cryptocurrencies will continue to attract income tax and South Africans will be required to declare their cryptocurrency losses and/or profits when declaring their taxable income.

In April, SARS said it was yet to establish a Value-Added Tax (VAT) for crypto. “The 2018 annual budget review indicates that the VAT treatment of cryptocurrencies will be reviewed. Pending policy clarity in this regard, SARS will not require VAT registration as a vendor for purposes of the supply of cryptocurrencies.”

In the draft regulations, SARS notes that since it has exempted cryptocurrencies as financial services, they will not charge VAT on the “issue, acquisition, collection, buying, selling or transfer of ownership of any cryptocurrency.”

“No VAT will be levied on any cryptocurrency, but SARS deems a cryptocurrency as assets of an intangible nature and therefore SARS will continue to apply normal income tax rules to cryptocurrencies. Affected taxpayers are obliged to declare cryptocurrency their capital or revenue gains or losses as part of their taxable income,” a partner at Hogan Lovells in South Africa, Natalie Napier, said.

Prior to April, SARS’s interest in taxing cryptocurrencies triggered the debate of whether cryptocurrency gains would be interpreted as income or capital.

Senior Lecturer in the School of Accountancy at the University of the Witwatersrand, Asheer Jaywant Ram observed: “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?”

SARS has now made its stand clear regarding capital and income tax with the draft regulations. The revenue body also wrote in an earlier statement:

“Cryptocurrencies are not regarded by SARS as a currency for income tax purposes or Capital Gains Tax (CGT). Instead, cryptocurrencies are regarded by SARS as assets of an intangible nature.”

According to Techweez, the proposed tax regulations are a sign that the South African government is supporting cryptocurrencies as opposed to other African countries that are banning their use.

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Almost a Quarter of High-Tech Consumers in South Africa Now Own Cryptocurrency

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High-Tech Consumers in South Africa

A new study titled “Digital Lifestyle Measure report” conducted by MBIT found that 23 percent of high-tech consumers in South Africa own at least one cryptocurrency, with bitcoin being the most common holding. 

New Report Shows High-Tech Consumers Hold Crypto

In the”Digital Lifestyle Measure report” report, each level of tech consumer (high, medium, and low) was grouped according to DM segmentation. A high-tech consumer is identified and tagged as a “DLM5 consumer”, and for the low-tech consumers, a “DLM1 consumer” was used. 

To place each of the participants in the right groups, the survey made use of a question and answer (Q&A) method. Each person was categorised according to how well they were able to answer the provided questions. The questions mostly focused on their private digital lifestyle and technological gadgets they own and can operate well.

The result of this survey shows that only six percent of the low-tech consumers (DLM 1) own crypto, while 23 percent of high tech consumers own cryptocurrencies. The remaining percentage was then shared in the order: DLM 2: seven percent, DLM 3: twelve percent, and DLM 4: eight percent.

cryptoThe report also stated that of the DML5 population, about 42 perfect of them are of the notion that cryptocurrencies are here to stay. Same goes for 30 percent of the DLM 4 consumers group.

Conversely, 41 percent of the low-tech consumers (DLM1 consumers) did not know what cryptocurrencies are all about, according to IOL

From the DLM 3 consumer group, about 34 percent of them cannot say what the future looks like for cryptocurrencies but 26 percent of them claimed cryptocurrencies to be the “future of financial transacting.”

The report has further shown that high tech consumers who are continually paying for something electronically, are more likely to buy crypto in the long run.

Based on the google trends data, South Africa currently has the highest levels of interest in bitcoin across the world. Hence, it should come as no surprise that tech-savvy South Africans are the ones investing in digital currencies and tokens. 

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Ecobank Report: Most African Regulators Are Taking a “Wait and See” Approach to Cryptocurrency Regulation

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African Regulators

While there has been a substantial increase in the adoption of cryptocurrencies in Africa compared to three years ago, there has been minimal effort from African countries to try and regulate cryptocurrencies despite their increased use in various African nations according to a new report by Ecobank.

Ecobank tracked “the current state of cryptocurrency regulation in all markets in Sub-Saharan Africa” through the regulatory responses that have been issued by central banks or financial regulators. In the report, the pan-African bank found that most African regulators are taking a “wait and see” approach when it comes to cryptocurrency regulation.

The report stated: “Many African governments and regulators recognise both the risks and the potential positive impacts of cryptocurrencies, and some also appreciate the difference between cryptocurrencies and the underlying blockchain technology. But they have been reticent in authorising cryptocurrency transactions, and mostly remain apprehensive about the potential risks. African countries appear to be looking to their neighbours to regulate and innovate first, and learn from their mistakes, rather than being the first mover.”

The reported noted that the main reason why African governments were being skeptical about licensing the use of cryptocurrencies was their citizens getting overexposed to cryptocurrency investments and there being a future crash that would cause a ripple effect in the broader economy.

African Regulators’ Stance

African RegulatorsOut of the 39 jurisdictions surveyed, more than 21 countries in the region are yet to make a public declaration on the use of cryptocurrencies.

So far, there have been three countries that have taken a stance on cryptocurrency. Namibia tops the list having banned the commercial use of digital currencies. However, South Africa and Swaziland are the only two countries in Sub-Saharan Africa that have adopted “a generally favourable and permissive stance, but without full legality”.

The remaining countries fall somewhere in between and “refuse” to directly regulate cryptocurrencies claiming that bitcoin and other digital currencies “operate in the grey area between legality and illegality” and have issued warnings to their citizens and investors against using or investing in them. The bank also noted that conversations regarding the speculative nature and instability of cryptocurrency prices have overshadowed their benefits and the potential they bring.

The bank went ahead to note: “Unfortunately, the spectacular rise and fall in the traded value of cryptocurrencies has drowned out broader discussion on the potential benefits this new technology could bring. The transformational impact that could be delivered by tokenising products and services on the blockchain has been compared to that of the Internet. Crypto tokens and currencies could enable consumers to transact instantly, cross-border and for free, provide them with KYC-compliant digital IDs, and incentivise their behaviour and change the way they engage with governments & service providers.”

Ecobank will continue to track cryptocurrency regulation in Sub-Saharan Africa and provide regular updates that will reflect the regulation progress in the African nations.

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Paxful Continues #BuiltWithBitcoin Charitable Initiative in Africa with the Construction of a Second School

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#BuiltWithBitcoin

Peer-to-peer bitcoin exchange Paxful announced the newest chapter in its #BuiltWithBitcoin charitable initiative: the construction of a school in Rwanda – for students aged six to fifteen – in the Nyamata Sector of Rwanda’s Bugesera District. This will be the second bitcoin-funded school that Paxful has raised funds for.

bitcoinContinuing its partnership with NGO Zam Zam Water, Paxful has kickstarted the project with a $20,000 donation. The total construction cost of the school is estimated to be $100,000. The remaining balance, Paxful hopes, will be raised through its fundraising campaign.

Donations can be made via Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and Dash.  Paxful will match all community donations until the $100,000 goal is met.

“The #BuiltWithBitcoin initiative is a testament to the power of cryptocurrency,” said Ray Youssef, CEO of Paxful. He added:

“We firmly believe that it can improve lives and make the world a better place.”

The planned school is expected to be almost twice the size of the first bitcoin-funded school and will serve up to 300 primary school students upon completion. Furthermore, the school will include a cafeteria, a 35,000-liter potable water well, solar panels for sustainability, and many other resources for the education and enjoyment of students, staff, and faculty, according to a company press release.

“Education is a crucial tool for helping those in developing nations increase their standard of living, so we are very pleased to partner with Paxful to serve these bright young students,” said Yusuf A. Nessary, founder and president of Zam Zam Water. He added:

“This is only a small glimpse into what we can and will continue to do with the power of cryptocurrency.”

Paxful began the #BuiltwithBitcoin initiative in 2017 to promote philanthropy and charity within the cryptocurrency industry. The company plans to construct 100 African schools, as well as donate money for wells and other projects.

To contribute to #BuiltwithBitcoin, send all donations to Zam Zam Water:

BTC (Bitcoin): 3Q5CESP85hhXTLSy2HDbSyNchb5Bi8D7ku
BCH (Bitcoin Cash): 15YGniLxo77kfMUWGoRNT6ShUQC93MvaXg

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