4. Electronic Theses and Dissertations (ETDs) - Faculties submissions
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Item Crypto assets as a financial service for VAT: An analysis(University of the Witwatersrand, Johannesburg, 2024) Matabane, Lesego‘Crypto assets’ is an umbrella term referring to digital financial assets (such as Bitcoin) founded on distributed ledger technology. The South African Revenue Service (SARS) defines crypto assets as a digital representation of value that are not issued by a central bank; thus, these assets are traded, transferred and stored electronically by individuals and entities – both natural and legal – for purposes such as payment, investment and various forms of utility (Ukwueze, 2021). The underlying technology behind crypto assets incorporates cryptography techniques (SARS, 2023). Since their inception in 2009, crypto assets have drawn increasing attention from regulators (OECD, 2020), and cryptocurrency has emerged as a novel form of payment in recent years. This development is fuelled by the flaws in the presently dominant payment method of fiat currency, which include the centralised structure of fiat currency, high transaction costs, the time it takes to process payments (especially for foreign transactions) and the need for more confidence in the institutions managing the current monetary systems (Hamukuaya, 2021). This report analyses whether a crypto asset can be classified as a financial service according to the South African Value-Added Tax Act, No. 89 of 1991 (VAT Act) legislation through an assessment of the features of crypto assets (also known as cryptocurrencies) and a comparison of the classification of crypto assets by South Africa to that by other countries. According to the study's findings, South Africa has adopted the strictest approach, excluding "the issue, acquisition, collection, buying or selling or transfer of ownership of any cryptocurrency" by categorising cryptocurrency as financial services under Section 2 of the VAT Act. The analysis also reveals that South Africa's approach to classifying cryptocurrency for VAT purposes is similar to that of other countries. Therefore, this research suggests that South Africa should broaden the investigation into categories such as the source of cryptocurrencies, nature of supply and place of supply transactions that include exchanging cryptocurrency assets for fiat money or other assets, as well as utility tokens when they are used. These suggestions might serve as further evidence that consensus about the VAT consequences of transactions involving cryptocurrency assets is still pending.Item A comparative study of VAT on cryptocurrencies(University of the Witwatersrand, Johannesburg, 2024) Schmidt, WernerThe 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