The South African government has set up a crypto task force with the aim to research into crypto and blockchain potential, particularly looking into how to tax crypto-related activity.
According to finance minister Tito Mboweni, in answer to a parliamentary query, this is with a view to developing a cohesive governmental response to cryptocurrencies and a unified intergovernmental regulatory framework.
This group includes representatives from the Financial Intelligence Centre, Financial Sector Conduct Authority, Treasury, the Reserve Bank and the SA Revenue Service (SARS).
“It is anticipated that, following broad industry comment and participation, the crypto assets regulatory working group will be ready to release a final research paper on the subject during the course of 2019,” Mboweni says.
In South Africa, SARS is unable to accurately determine the amount of profits on cryptocurrencies due to the tax-related disparity with crypto trades. The finance minister assures that the team will find a remedy for this, which will apply normal tax rules for cryptos.
Taxpayers who have made some form of declarations regarding cryptocurrency trades have captured such trade as a form of “other trade income” or “other trade loss”, and have made reference to a description of digital/crypto currency trading.
The Taxation Laws Amendment Bill of 2018 included proposed amendments to the treatment of cryptocurrencies for income tax and VAT purposes. You can read all about it here.
These amendments would ensure that losses on cryptocurrencies may only be offset against profits from cryptocurrencies (known as ring-fencing).
Mboweni adds that the amendments would also clarify that cryptocurrencies cannot be classed as personal-use assets for capital gains tax purposes and would treat cryptocurrencies as financial services for VAT purposes.