An analysis of South Africa’s guidance on the income tax consequences of crypto assets

Abstract

Background: A media statement issued by the South African Revenue Service (SARS) in 2018 represents the primary guidance available to South African taxpayers on the income tax consequences of crypto asset transactions.Aim: This study assessed the adequacy of the guidelines available to South African taxpayers on the consequences of crypto asset transactions, and identified the income tax consequences for transactions not addressed in these guidelines.Setting: This study compared the scope and depth of the SARS guidelines to guidance issued in other jurisdictions. This distinguishes it from other studies focusing on the theoretical income tax consequences of crypto asset transactions.Method: The first phase of the study was an in-depth documental analysis to benchmark the SARS guidelines against the guidance of tax authorities in other jurisdictions. In the second phase of the study, a doctrinal legal research methodology was adopted to identify the income tax consequences of transactions not addressed by SARS, applying existing legislation and case law, and taking into account the guidance of the other selected tax authorities.Results: The study found that the SARS guidelines did not comprehensively address all the crypto asset transactions addressed by the other selected tax authorities.Conclusion: The study recommended that SARS provide comprehensive guidance to South African taxpayers on the income tax consequences of crypto asset transactions, the development of which would be supported by consequences identified in this study.Contribution: This study contributes to the understanding of, and development of taxpayer guidance to address the income tax consequences of crypto asset transactions in South Africa.

Cryptocurrencies’ Impact on Accounting: Bibliometric Review

“…The emergence of cryptocurrencies has introduced a novel asset class with unique accounting and taxation considerations (Bozdo gano glu 2022; Cassidy et al 2020;Cong et al 2023;Obu and Ukpere 2022). Governments are still grappling with establishing clear rules for taxing cryptocurrency transactions, creating uncertainty for both governments and taxpayers (Pimentel and Boulianne 2020;Vumazonke and Parsons 2023). Tax authorities must explore the underlying principles of taxing cryptocurrency transactions to increase tax revenue potentially (Angeline et al 2021).…”

“…Donating cryptocurrency to charity offers an additional tax benefit in South Africa: exemption from capital gains tax. This means the fair market value of the donated cryptocurrency is not counted as income, a capital gain, or a loss for tax purposes (Vumazonke and Parsons 2023). This exemption can incentivize charitable giving using cryptocurrency.…”