How to pay your tax on your crypto (if you need to)

It’s tax filing season for many of our South African users, and the same question appears every year – ‘Do I need to pay tax on my crypto?’ We’ve partnered with Recap to explore this question – let’s dive in.

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 generally taxable in the eyes of the South African Revenue Service (SARS), where crypto is seen as a ‘financial instrument’. This classification results in cryptocurrency being subject to capital gains or income tax depending on your personal circumstances.

Investor or trader

SARS have different rules for different types of crypto users, so how you complete your tax return will depend on a number of factors including if you are considered a crypto ‘investor’ or ‘trader’ as well as other details relating to your income.

Traders are typically taxed on revenue income whilst Investors will pay capital gains tax. There’s no simple way to determine which bracket you fall into and each person’s circumstances will be different. If you want to know more, you can check out the ‘Investor or Trader’ section of Recap’s comprehensive crypto tax guide here.

Getting your transaction history and calculating capital gain and income

When filing your crypto taxes, it is crucial to account for all of your historical transactions for all wallets and exchanges. We provide a downloadable statement for each tax period which you can use to manually calculate your taxes. Alternatively, crypto tax calculators like Recap allow you to connect to your account using API Keys, which automatically price your assets and calculate your capital gain and income. 

You’ll need to ensure that you’ve got detailed records of all of your trades and accurate and consistent pricing for each asset, and then you can calculate your taxable gains or income.

Crypto tax calculators simplify this process and provide reliable, downloadable reports that you can use to file a return. 

We’ve partnered with Recap to provide you with free access to their crypto tax calculator including downloadable tax reports for your Luno account. 

Understanding your tax position

When you have established how you will be taxed and your reportable gain/income you can work out the tax due. Struggling? Guidelines from SARS are still in flux, so understanding your tax position isn’t always straightforward. If you need a hand, reaching out to a crypto tax specialist 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 worked out your overall tax position, you’ll need to use SARS eFilling to submit your return. There are two sections for investors that you might need depending on how you choose to submit:

Firstly, the general taxation questionnaire includes references to crypto in the capital gain/loss section:

Provisional taxpayers may also need to complete a balance sheet including the section specifically for crypto taxes:

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

Wrapping up

Once you’ve submitted your return it’s a good idea to back up copies of all your trading history as it may be requested by SARS. Take copies of any of your transaction history downloaded from Luno, exported data and anything else that you’ve submitted. 

We’ve partnered with Recap to provide you with free access to their crypto tax calculator including downloadable tax reports for your Luno account. 

To work out whether you need to pay taxes on your crypto, head over to Recap where you’ll be able to use their app and download your report for free.

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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.

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