SARS Comes Knocking: South Africa Says Your Crypto Isn't Currency, It's an "Asset" 🪙

The South African Revenue Service (SARS) on Wednesday published draft guidelines clarifying how crypto assets are taxed under the country's existing Income Tax Act of 1962 and capital gains tax framework, treating most trading, swapping and spending activity as disposals that may trigger tax events. The draft guidance, which remains open for public comment until August 31, applies existing rules rather than introducing new legal obligations, according to SARS.

The agency reiterated that crypto assets are not legal tender or foreign currency, but rather intangible assets for tax purposes. "The preferred interpretation of the legal nature of crypto assets is that, although highly versatile and capable of negotiability, they are not 'currency' and, consequently not 'foreign currency'," SARS said. The guidelines also note that crypto assets may fall under South Africa's donations tax as "property," with rates ranging from 20% to 25% depending on the value of the transfer.

Tax treatment under the proposal depends heavily on individual circumstances, with SARS placing significant weight on taxpayer intention when distinguishing between traders and long-term investors. "It is important to consider the taxpayer's intention at the time of acquisition, at the time of selling the asset, and whilst holding the asset, as a taxpayer's intention regarding an asset may change over time," the authority said. Classification relies on behavior, transaction frequency and the purpose for holding the asset, requiring a broad assessment of all relevant facts.

If adopted, the guidelines would affect a substantial user base. SARS reported in 2024 that at least 5.8 million residents held crypto assets, and South Africa has emerged as one of Africa's largest crypto markets. According to Chainalysis' October 2024 report, the country received roughly $26 billion in crypto value during the one-year period covered by the study, with institutional and professional-sized transactions identified as the largest contributors to total value received, particularly from late 2023 through the first quarter of 2024.