CAPE TOWN - Cryptocurrency is under increasing scrutiny, following its gains over the past four years. We take a look at what South African's should prepare themselves for, if and when the tax on bitcoin is introduced.
According to regulations by the Reserve Bank, cryptocurrency, Bitcoin is subject to general tax principles.
However, the cryptocurrency does not have legal-tender status.
Corporate tax consulting at public accounting, tax, consulting and business advisory firm BDO, Marcus Botha said in October last year that the South African Reserve Bank (Sarb) does not consider cryptocurrencies as legal tender.
"Cryptocurrencies are not subject to the regulations of the Reserve Bank, as the position paper they released on virtual currencies states that the cryptocurrency does not have legal-tender status. Until further clarity and formal regulation, Sars will apply general tax principles and tax the income or capital gains that are received or accrued to a taxpayer", said Botha.
The South African Revenue Service has however indicated that it will decide upon a tax regulation for cyptocurrencies by the beginning of this year.
What remains a concern, however is under what jurisdiction bitcoin will fall under.
Under certain jurisdictions, bitcoin is considered an asset while other jurisdictions consider it a currency.
Meanwhile, in the United States, bitcoin tax measures are in place.
Bitcoin traders in the US have the option to file their tax using a range of software such as Bitcoin.Tax and CoinTracking.
Bitcoin.Tax allows users to upload CSV files from exchanges and it is free for up to 100 transactions while CoinTracking is free for up to 200 transactions
They are advised to first download all their transaction data from the exchanges they use.
These are generally available as CSV files.
Some exchanges like Coinbase send users form 1099-K if they received at least R239 312 cash for sales of cryptocurrency related to at least 200 transactions in a calendar year.
The tax rate that bitcoin users in the US are liable for all depends on how long they have held their bitcoin and how they acquired bitcoin.
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