April 6 was D-day for cryptocurrency traders with SARS announcing these types of currencies, like Bitcoin, are now going to be taxed.
Bitcoin tax means, like any other taxable income, the onus is on you 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, which is why the accurate processing of these losses and gains as part of your business’s accounting processes is going to be very important.
There’s been a lot of speculation around cryptocurrencies for a while now, with everyone wondering what SARS’ Bitcoin tax plans for South Africa would be. Well, now we finally know their plans … Bitcoin tax is here.
Cryptocurrency (of which Bitcoin is the most common) is an internet-based digital currency that exists almost wholly in the virtual realm. A growing number of followers support its use as an alternative currency that can pay for goods and services, much like conventional currencies.
Growing popularity and speculation regarding the future of cryptocurrency prompted SARS to step forward and provide direction about Bitcoin tax.
These are some of the most salient points from the SARS Bitcoin tax plans for South Africa announcement:
- Cryptocurrencies are neither official South African tender nor widely used and accepted in South Africa as a medium of payment or exchange. As such, cryptocurrencies are not regarded by SARS as a currency for income tax purposes or Capital Gains Tax. Instead, cryptocurrencies are regarded by SARS as assets of an intangible nature.
- While not cash, Bitcoin can be valued to ascertain an amount and can be accrued, just as “gross income” is described in the Income Tax Act. This makes Bitcoin accrual taxable under “gross income”.
- As a taxpayer and a Bitcoin trader, you are also entitled to claim expenses associated with cryptocurrency accruals or receipts, provided such expenditure is incurred in the production of the taxpayer’s income for the purposes of trade.
- 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.
To comply with this new Bitcoin tax, just like when you’re trading in cash, all transactions need to be accurately documented and easily accessible come tax season.
Since Bitcoin is a very new tax law, you may need help to manage your cryptocurrency finances.
The right online accounting software and online bookkeeping software packages are an easy and affordable solution to sorting out your financials.
QuickBooks accounting software is the solution to all financial management for small business owners. Call 010 203 4300 or email firstname.lastname@example.org today.