TL;DR,

• SARS crypto tax compliance remains unclear despite 138 approved crypto asset service providers out of 383 applications, with authorities prioritizing enforcement over clarifying abstract taxation rules.
• Contrary to what many South African traders think, crypto taxation triggers happen right away when assets are exchanged, even if they don’t change into fiat currency.
• As South Africa moves forward with crypto regulation, legal experts are calling for clearer rules on how to tax cryptocurrencies.

Thomas Lobban, a tax and legal senior associate at Latita Africa, highlighted that South Africa now has almost 140 crypto asset providers, yet the SARS crypto tax eludes many operators.

The Financial Sector Conduct Authority (FSCA) recently approved 63 more crypto asset service provider (CASP) license applications. Consequently, they are now authorized to act as financial services providers, bringing the total number of approved CASPs to 138 out of the current 383 applications.

“The good news is that this forms an important part of South Africa’s project to escape its grey-listed status with the Financial Action Task Force,” Lobban said. “However, when it comes to taxpayers maintaining their compliance with SARS, many crypto traders remain none the wiser about the correct tax treatment of their investments.”

“In some ways, SARS and National Treasury expect crypto-active taxpayers to remain compliant while the rules around crypto are still abstract,” he added.

According to Lobban, authorities are perceived by many to be putting the cart before the horse as they focus on enforcement first and less on clarifying crypto taxation mechanics.

South Africa’s Crypto Boom Meets SARS Crypto Tax Fog

Latita Africa fully supports the regulation of the crypto economy, which promises to stabilize the often-volatile local crypto markets, protect consumers from fraud and predatory practices, restrict money laundering schemes and the funding of terrorism, prevent tax evasion, and recover undeclared income and capital gains on crypto.

RELATED: South Africa Issues Historic Crypto Licences to Seventy Five Companies

As CASPs implement know-your-customer processes, anonymous usernames are replaced with detailed customer records. “The warning is that not only will current and future crypto trades be exposed to SARS’ data collection efforts, but also historic untaxed transactions previously protected by that anonymity,” Lobban explained.

“While this is certainly nothing new, as SARS has requested taxpayer information from CASPs before, this information will now be much more readily available.” 

The Compliance Dilemma of SA’s Crypto Taxation Mechanics

One of the worst things about the SARS crypto tax is that it doesn’t use the word “cryptocurrency.” People think of crypto as a digital asset, unlike property or shares in the stock market.

Its essential tax treatment depends significantly on how it is acquired and disposed of. It may be revenue from a trade stock sale, income earned from employment, capital gains on disposal, a windfall from a competition, or some other source, and it is taxed accordingly.

“But it’s not easy to determine a crypto asset’s tax status. If I buy and sell crypto in the short term, it’s not necessarily income; if I hold it over a long period, its disposal is not necessarily counted as capital.”

Thoman lobban,tax and legal senior associate at Latita Africa,[Photo: TechNext]

“As another example, exchanging rand-bought Bitcoin for an NFT and later converting the NFT back to Bitcoin is not a passive transaction just because rands are not involved,” he explained. “Both are considered to be assets and, by law, the mere exchange of assets triggers tax implications at that instant.”

A Common Misconception: Tax Triggers Before Cashing Out

Therefore, they must pay tax in rands at the prevailing exchange rate in the tax year the transaction was completed, even if they never cash in the Bitcoin. “This goes against the commonly held but mistaken belief that tax is only assessed when the crypto asset is converted back to fiat,” he said.

Lobban stressed that SARS and the National Treasury should focus more on clarifying and removing the ambiguity within the crypto taxation mechanics to create certainty around how different classes and instances of crypto assets will be affected. In addition, they should endeavor to better educate crypto traders on these treatments. At the same time, the FSCA crypto license does streamline digital asset regulation in South Africa it’s still a long stretch from meeting various standards.

“This is not a rare occurrence. Notably, for traditional stock trading, section 9C of the Income Tax Act generally deems shares held for more than three years as subject to CGT on their disposal, not income tax,” he said.

“This type of clear direction is what crypto traders need to remain tax compliant, and authorities should be driven to provide this as much as they are in the equally important imperative of enforcing the current laws.“

A Call for Clarity

The SARS crypto tax is an admirable move towards better regulation. The complexity surrounding the development of such laws is understated. It’s more like fitting a circle in a square box; at first, it will fit; however, gaps remain, which can be exploited by either the regulators or the providers.

RELATED: SA Slams the Door on Crypto Loopholes: Cross-Border Rules Drop in 2025!

The rules are changing rapidly, and regulators, investors, and innovators must catch up with the changing tide. For South Africa, the ball is rolling with a few tweaks required on its mechanics, a comprehensive outlook and an educational approach.