Your 30-second South African tax guide 2022

It’s tax season – time to get your data in order and file your return. But what about your crypto transactions? Check out our 30-second crypto tax guide for South Africa to help you get started.

Investor or trader?

The South African Revenue Service (SARS) has different rules for filing your tax return depending on if you are an investor or trader, so it’s important to know which bracket you fit into.

If you’ve been buying, selling, or trading cryptocurrencies on a regular basis, then SARS might consider you to be a trader and your activity to be revenue, in which case you will be taxed at your nominal tax rate.

However, if your transactions are infrequent or you hold an asset for a long period of time, SARS will likely consider you an investor and your activity is more likely to be capital in nature. In this case, gains on trades will be taxed in terms of capital gains tax.

Whether you are considered an investor or a trader will depend on your intentions and the types of activity that you’ve been engaged in. We’ve simplified the requirements above to make for quick reading – you can read more in Recap’s full tax guide, but if you’re still not sure which you fit into, it’s always best to speak to a tax advisor.

Valuation method

It’s generally accepted that a First In, First Out (FIFO) method should be used for calculating any taxes on crypto in South Africa. Whilst it is possible to use alternatives, things can get complicated quickly so we’re only covering FIFO here. FIFO essentially means that assets acquired first are disposed of first when we crunch the numbers to calculate an overall tax position.

For example, let’s say you:

• Purchased 1BTC for R 300k in Jan
• Purchased 2BTC for R 700k in March
• 3 years later sold 1 BTC for R 700k
  • The calculation will be as follow:
    R 700k (selling price) – R 300k (purchase price)
    = R 400k gain
• Wallet balance = 2 BTC

If this is all making your head hurt, don’t panic. We’ve partnered with Recap to provide Luno users with free access to Recap’s comprehensive tax reporting app which can crunch the numbers for you.

Tax deadlines

SARS announce filing deadlines every year – this year’s dates are 24 October 2022 for normal individual tax return filings and 23 January 2023 for taxpayers who are registered provisional taxpayers.

Provisional tax isn’t a special form of tax, it’s simply a method of paying your taxes throughout the tax year rather than in one lump after assessment. If you earn income other than a salary and don’t pay tax via pay as you earn (PAYE), then you are likely a provisional taxpayer.

Provisional payments are typically made twice per year in August and February. Customers should determine whether they should register as provisional taxpayers by speaking to their tax consultants. Guidance on provisional tax from SARS is available here.

Keeping accurate records

In South African tax law, investors are required to maintain accurate records of their trading history. These should include the type of crypto asset, relevant dates, types of transactions (e.g. bought, sold, swapped) as well as quantities and values in Rand. It’s also a good idea to keep a record of your entire asset history to keep track of how many assets you have at any given time, going back no less than five years. Users can download a wallet statement from their Luno Wallets for a record of all trades.

Verification

After filing your return, you may be selected for verification or audit.

Verification is where SARS requests relevant documents and information to compare against your disclosures, which must then be submitted within 21 business days.

We’ve partnered with Recap to provide Luno users with free access to Recap’s comprehensive tax reporting app and downloadable reports. Simply connect your accounts to their privacy-focused app and they’ll calculate your taxes for you.

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.