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    A comparative study of VAT on cryptocurrencies
    (University of the Witwatersrand, Johannesburg, 2024) Schmidt, Werner
    The research landscape pertaining to cryptocurrencies has witnessed extensive exploration across various disciplines, including information technology, legality, accounting, and taxation. However, a noticeable shortage of comprehensive investigations exists regarding the challenges faced by tax regimes and jurisdictions in taxing cryptocurrencies. This study aims to bridge this gap by conducting a meticulous analysis of the characteristics of Bitcoin and the tax implications of cryptocurrencies in South Africa and other jurisdictions. Special attention will be devoted to scrutinizing the ramifications of Value-Added Tax (VAT) on cryptocurrency transactions. Notably, existing literature sheds light on the challenges encountered by the South African Revenue Service (SARS) in revenue collection from cryptocurrency transactions. The necessity for SARS and the Treasury to refine prevailing legislation emerges as a critical consideration to curtail tax evasion in cryptocurrency transactions and ensure the effective collection of tax revenue. Cryptocurrencies, as virtual currencies existing outside central bank control, have triggered varied responses from different jurisdictions. While some tax jurisdictions permit the use of cryptocurrencies, others outrightly prohibit them. In the South African context, the use of cryptocurrencies is not prohibited, and SARS has implemented VAT legislation specific to cryptocurrencies. Designating cryptocurrencies as financial services for VAT purposes renders them exempt from VAT, as financial services fall within the category of exempt supplies under Section 12 of the VAT Act 89 of 1991 (VAT Act). This exemption implies that neither standard nor zero rates are applicable to financial services. The primary objective of this research is to explore alternative classifications for cryptocurrencies by SARS for VAT purposes. To achieve this, a comparative study was conducted, focusing on the VAT classifications of cryptocurrencies in Bahrain, Thailand, Colombia, and Ireland. The research revealed that Thailand and Bahrain have adopted a categorization resulting in the imposition of actual VAT on cryptocurrency transactions. This finding challenges the argument against levying VAT on cryptocurrencies, based on the perceived difficulty in determining their value and subsequently determining the appropriate VAT charges. Consequently, the study suggests that SARS should explore alternative approaches that may broaden the VAT tax base and enhance the effectiveness of VAT collection in the context of cryptocurrency transa
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    The tax implications of crypto assets in South Africa
    (University of the Witwatersrand, Johannesburg, 2023) Mistry, Riya; Kolitz, Maeve
    The primary objective of this research report is to examine the current South African legislation and guidance on the taxation of crypto asset transactions. More specifically, this research report will focus on identifying any inadequacies in the legislation and guidance issued by the South African Revenue Service (SARS) and provide suggested solutions to these inadequacies. In 2018, SARS issued a media release (South African Revenue Service [SARS], 2018) to clarify its stance on the tax treatment of crypto assets and issued a list of frequently asked questions on crypto assets which was revised in 2021 (SARS, 2021a). More recently, The Commissioner of SARS, Edward Kieswetter, confirmed that any undisclosed holdings of crypto assets would be a prioritised area of focus for the tax revenue authority in the 2021 year of assessment (Tax Consulting South Africa, 2021). This indicated that SARS would be focusing more on the taxation and verification of crypto asset transactions in the near future. In August 2021, SARS provided further guidance on the taxation of crypto assets on their website. According to this guidance, normal income tax rules apply to crypto assets, and affected taxpayers must declare profits and losses from crypto assets as part of their taxable income. Taxpayers are further required to declare all taxable income related to crypto assets during the tax year in which it was earned or accrued; if not, the taxpayer will be subject to penalties and interest (SARS, 2021b). The findings of this research report are that the acquisition, exchange, and disposal of crypto assets represent separate transactions with clearly identifiable income tax consequences in South Africa. The income tax consequences are dependent on whether the accrual and the amount are of a capital or revenue nature. This research report seeks to identify inadequacies in the legislation and guidance issued by SARS on the taxation of crypto assets. This will be achieved by conducting a comparative analysis between the legislation and guidance issued by the Australian Taxation Office (ATO) in Australia, the South African Revenue Service (SARS) in South