For the average person who invests in Crypto Assets, it is not as “secret or private” as you are led to believe. Normal income tax rules apply to crypto-assets, and you need to declare crypto assets’ gains or losses as part of your taxable income.
Are you aware that SARS has a memorandum of understanding with the main crypto platforms, which grants them access to 3rd party data?
What people don’t realise is that SARS enforces late penalties, and if you don’t declare on time, all your profits could be paid to tax or even worse, you get a criminal record!
Bullivant Accounting and Tax Services advises to declare it before SARS finds it!
Understanding tax implications
When you trade on various platforms, there are various tax treatments, and this will have an impact on your profit.
A Typical transaction will be taking your FIAT currency (Rand) and converting it to dollars and then purchasing your crypto asset (this will depend on the platform you use. You could buy crypto in rands or convert rand into dollars and then crypto).
You have a choice of what you want when you purchase your crypto asset - It can be as simple as buying one static unit (your unit stays the same – the value rises and falls), a stacking unit, or an interest-bearing unit.
Before you sign up as a “crypto trader” or experiment with buying some cryptocurrency, you should familiarise yourself with some of the tax implications:
Income received or accrued from crypto assets transactions can be taxed on the revenue account under “gross income".
Crypto Assets can also be seen as Investments and the sales of a unit could be subject to capital gains tax.
Avoiding penalties
If you decide you are going to sell a unit/fraction – that sale is measured against your history (long-term capital gain) and you are taxed against capital gains tax not normal income tax. Trading falls into trading income and you are subject to full income tax. You do get crypto assets that are stacked or interest-bearing – these are treated as a trade, and you are not allowed to use investment allowances against them.
Crypto assets work on the principle of first in and first out unless you can specify a specific transaction acquisition to a disposable asset without any variables/fractions (The data has to be exact).
Keeping track of the purchase price and exchange on the day your crypto asset is purchased is important to determine the best tax treatment.
How we can help
Bullivant Accounting and Tax services can access the Cryptocurrency tables (to determine the ruling price for the day) and access the exchange rates on the day to convert them into rand.
Bullivant Accounting and Tax Services can help you unpack your crypto assets and help you through the Voluntary disclosure process/route, come clean with SARS and pay the right amount of tax and, if necessary, the penalty.
Don’t let your crypto assets work for the tax man!