An analysis of South Africa’s guidance on the income tax consequences of crypto assets

Abstract

Background: A media statement issued by the South African Revenue Service (SARS) in 2018 represents the primary guidance available to South African taxpayers on the income tax consequences of crypto asset transactions. Aim: This study assessed the adequacy of the guidelines available to South African taxpayers on the consequences of crypto asset transactions, and identified the income tax consequences for transactions not addressed in these guidelines. Setting: This study compared the scope and depth of the SARS guidelines to guidance issued in other jurisdictions. This distinguishes it from other studies focusing on the theoretical income tax consequences of crypto asset transactions. Method: The first phase of the study was an in-depth documental analysis to benchmark the SARS guidelines against the guidance of tax authorities in other jurisdictions. In the second phase of the study, a doctrinal legal research methodology was adopted to identify the income tax consequences of transactions not addressed by SARS, applying existing legislation and case law, and taking into account the guidance of the other selected tax authorities. Results: The study found that the SARS guidelines did not comprehensively address all the crypto asset transactions addressed by the other selected tax authorities. Conclusion: The study recommended that SARS provide comprehensive guidance to South African taxpayers on the income tax consequences of crypto asset transactions, the development of which would be supported by consequences identified in this study. Contribution: This study contributes to the understanding of, and development of taxpayer guidance to address the income tax consequences of crypto asset transactions in South Africa.