South African crypto taxes: A beginner’s guide

SARS expects you to pay tax on earnings from crypto gambling, trading and mining

When it comes to crypto taxes in South Africa, it is crucial for any beginner to understand the basics. The South African Revenue Service (SARS) treats cryptocurrencies as “assets of an intangible nature” and not currency or property, which means that they are subject to capital gains tax or income tax, depending on how they’re used. 

For those using their crypto for online activities, like playing on the crypto casinos South Africa offers, it’s important to note that any wins from these online platforms may also be taxable. Whether you’re earning from crypto gambling, trading or mining, you must accurately report your crypto earnings to avoid penalties.  

South African taxpayers must keep a detailed record of all crypto transactions, including the cost, date of purchase and the value at the time of use or sale. This is especially important if you’re cashing out crypto winnings from online platforms. Tax implications vary depending on how often you’re engaging in these online activities, and whether the earnings are part of a hobby or a business. 

When it comes to trading cryptocurrencies, SARS treats these transactions as barter exchanges, which are taxed at 18%. This means that the fair market value of the exchanged currency is considered the amount taxable. For example, if you trade Bitcoin for Ethereum, the market value of the received Ethereum is considered the taxable amount. Using crypto to make any payments to acquire goods or services is also considered a barter transaction and is taxed accordingly.

Another aspect to take note of is the taxation of crypto mining. In South Africa, the income derived from mining is generally considered ordinary income, and taxed as such. This means that any profits from mining are subject to the same tax rates as other income.  

Other crypto-related activities may also have tax implications. For example, staking cryptocurrencies includes earning rewards. These rewards are considered taxable income. Airdrops (which are free digital assets distributed to holders of a cryptocurrency) are also considered taxable. 

Any income derived from staking, mining or airdrops is currently taxed at 45%. 

However, you should note that long-term holdings of mining income could qualify for a lower capital gains tax rate. 

SARS expanded its cryptocurrency audit capabilities in 2020, which included hiring specialists for crypto tracking. SARS emphasised its authority under tax legislation to enforce compliance. According to SARS’s guidelines, taxpayers could face severe penalties if they misreport any cryptocurrency transactions, and point residents to Chapter 16 of the Tax Administration Act of 2011. 

Although SARS has provided some guidance on crypto taxes, it is important to note that the tax landscape in South Africa may be dynamic. Regulations will evolve over time as more people and businesses embrace cryptocurrencies. It is advisable that both beginners and experienced crypto users stay updated on the latest regulations, or consult with a tax professional for advice.