In April, the South African Revenue Service (SARS) announced its plan to start taxing cryptocurrencies. The cryptocurrency frenzy has taken over, and investors and wealthy millionaires are all racing for a piece of the blockchain pie. However, some are skeptical that blockchain and especially bitcoin works more like a pyramid scheme. The likes of Warren Buffet and Bill Gates have been keen to warn people against putting their money in uncertain and little-known ventures such as bitcoin. However, not everyone has adhered to the red flags pointed out by the two billionaires, and the South African government wants to cash in while it is still hot.
The South African Revenue Service (SARS) explained that cryptocurrencies are regarded as assets of an intangible nature and hence they are subject to income tax. The word currency is not widely used in the southernmost African nation. The revenue authority body also stated that cryptocurrencies are neither an official South African tender nor widely accepted as a medium of payment or exchange. As such, the South African revenue service does not recognize cryptocurrency as a currency for income tax purposes of Capital Gains Tax (CGT). Instead, it is viewed as an intangible asset.
Interest in cryptocurrency has been leveling up in Africa with entrepreneurs seeking to present Africa’s own blockchain attempt with NuruCoin by Kenyans. Unexpectedly, South Africans welcomed the move as the government’s show of support for the cryptocurrencies in the country. This is a contrast to what many other African countries are doing by rejecting cryptocurrency and its use. In July the South African revenue authority made a proposal draft to determine how cryptocurrencies would be treated in the country.
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In the new proposal, cryptocurrencies will be identified as intangible assets and therefore, when the law comes into effect South Africans will have to declare their profits and losses when they declare their taxable income as per usual. The draft regulations also covered the value-added tax treatment known as VAT, as cryptocurrency is considered as a service. South African Revenue Services has provided that cryptocurrencies will be treated as an exempt financial service and therefore, VAT will not be applied. This includes the issue, acquisition, collection, buying and selling of the cryptocurrency or even transfer of ownership.
In a final statement, the SARS concluded that it deems cryptocurrency to be of an intangible nature, and will, therefore, continue to apply the normal income tax rules to cryptocurrencies. South African’s previously fell victim to a fraudulent online scheme by supposed, bitcoin miners. Majority of the investors on BTC Global were South Africans who lost an estimated $50 billion. The extent of the scam hit the shores of Australia and the US as well, but the most affected were South Africans.
Investors were lured into the scam unsuspectingly by a so-called expert investor, by sending their money to the company wallet for a guaranteed fixed interest of 14% every week. Those who invested or participated claimed that they had been receiving the promised cash weekly, until the sudden disappearance of the bitcoin guru Steven Twain. Individuals claim to have lost up to 10 million KES, of which they had invested in BTC Global.
Over 27,500 complaints were made in the country alone and more from overseas, claiming foul play. The company itself claims to have been scammed as well by the said Steven Twain whom they have lost contact with. There have been numerous fraudulent cases when it comes to cryptocurrency especially bitcoin and Ethereum, hence the South African government seeking a way to manage and regulate it.
Investments in legitimate bitcoin cryptocurrency can yield huge profits, however, it also requires the amounts of investment with the current purchase per coin going at a very high price. Users online are encouraged to be cautious, as companies like Google get ahead by banning cryptocurrency miners from the Play store and advertising corridors.