How to pay tax on your crypto in South Africa

It’s tax filing season in South Africa, and many South Africans are likely wondering whether they need to pay tax on their crypto transactions. We’ve partnered with Recap to answer the most important questions about crypto and taxes.

Do I need to pay tax on my cryptocurrency?

The short answer is, yes. Crypto trades and investments in South Africa are taxable, but that’s not the whole story. Crypto trading, whether it’s buying cryptocurrency with fiat currency, trading crypto for crypto,or earning passive income, are all taxable in the eyes of the South African Revenue Service (SARS), which sees crypto as a ‘financial instrument’. This classification results in crypto assets  being subject to capital gains or income tax, depending on your personal circumstances.

Which taxes apply to crypto?

Either income tax or capital gains tax will apply to crypto asset activities, depending on the type of gains and the activity undertaken to generate them. Any gains from short-term and active transactions are generally subject to income tax, whereas long-term and passive gains (i.e., investment returns) are generally treated as capital gains. 

Investor or trader?

SARS has different rules for different types of crypto users. How you complete your tax return depends on various factors, including whether you’re considered a crypto ‘investor’ or ‘trader’, as well as other details relating to your income. “Traders” are typically taxed on revenue income, while “Investors” pay capital gains tax. There’s no simple way to determine which bracket you fall into, and each person’s circumstances are different. If you want to know more, you can check out the ‘Investor or Trader’ section of Recap’s comprehensive crypto tax guide here, but if you’re still not sure which you fit into, it’s always best to speak to a tax advisor.

Record-keeping for crypto tax purposes 

It’s crucial to include all historical transactions for all wallets and exchanges when filing your crypto taxes. We provide a downloadable statement for each tax period, which you can use to manually calculate your taxes. Alternatively, a crypto tax calculator like Recap connects to your account  and conveniently calculates your capital gains and income. 

Calculating your crypto tax obligations

Ensure that you have detailed records of all of your trades and accurate and consistent pricing for each asset, after which you can calculate your taxable gains or income.

If you are a trader with revenue income, you will be taxed on your entire profits plus other taxable income less allowable expenses. 

Investors will be taxed on 40% of any net capital gain exceeding the annual R40,000 exclusion. To calculate the capital gain on your transactions, subtract the cost base from the sale proceeds.

Calculating the cost base of a crypto asset 

SARS has not released specific guidance on cost-basis methods for crypto, however, we can  expect from general CGT guidance that South African taxpayers should use either  

• Spec ID – the specific cost base for the asset sold, or 
• First In, First Out method – where the first asset you buy is the first asset you sell. 

Crypto tax calculators simplify the process of calculating your crypto taxes, providing reliable, downloadable reports which you can use to file your return. 

We’ve partnered with Recap to provide you with free access to their crypto tax calculator to evaluate if there’s a need to file a tax report.

Understanding your tax position

When you have confirmed your reportable gain/income, and how this will be taxed, you can calculate the tax due. Guidelines from SARS are still in flux, so understanding your tax position can be tricky. If you need a hand, reach out to a crypto tax specialist, who can provide reassurance and peace of mind. Recap’s in-app sharing feature makes it easy to collaborate with an advisor by giving them sight of your account.  

Filing your tax return 

Once you have calculated your overall tax position, you can use SARS eFiling to submit your return. There are two sections investors need to be aware of, depending on how you submit. Firstly, the general taxation questionnaire where it references crypto assets in the capital gain / loss section:

Provisional taxpayers need to complete a balance sheet including the section specifically for crypto assets:

Traders may also need to complete additional forms. For more information on how to file your tax return, see SARS Crypto Asset and Tax documentation here.

Wrapping up

Once you submit your return, it’s a good idea to back up copies of all your trading history, as it may be requested by SARS. An important requirement in South African tax law is that taxpayers retain their records for at least five years after filing their return.  

Take copies of any transaction history downloaded from Luno, exported data, and anything else you have submitted, including your calculations. 

We’ve partnered with Recap to provide you with free access to their crypto tax calculator to evaluate if there’s a need to file a tax report. 

To work out whether you need to pay taxes on your crypto, head over to Recap where you can connect your Luno account and calculate your capital gain. To download a tax report or delve deeper into your tax insights, upgrade to a paid plan with Recap’s exclusive 20% discount for Luno customers in South Africa, available until 31 December 2024. Simply enter code LUNOSA20 at checkout to apply the discount on Recap Basic and Pro paid plans for one year.

Calculate your crypto taxes for free with Recap

The information contained in this blog is not, and should not be construed as, financial advice, nor as tax advice, nor as a solicitation to trade. All opinions, news, research, analysis, prices or other information displayed herein is provided for informational purposes only.

Please note that Recap is not a registered tax advisor, and that Luno makes no warranties or representations as to the veracity of any information provided by Recap to Luno customers, through the Luno platform. Tax consequences will naturally depend on the individual circumstances of the taxpayer concerned and, as such, are highly individual. You should accordingly consult with your own tax advisor for definitive advice. Luno shall not be liable to you for the accuracy of any information provided herein, nor shall it be liable should you choose to create an account with Recap and/or choose to utilise Recap as a tax solution tool, and you expressly agree to waive any claim against Luno in this regard.