How does SARS treat Cryptocurrency in your estate?

Cryptocurrency is a hot topic at the moment and as such has arrested the attention of the South African Revenue Service (SARS). Many people are jumping on the bandwagon and becoming Crypto traders overnight. 

Although cryptocurrency is not considered as a currency for purposes of South African income tax, it is regarded as an asset and SARS applies the normal income tax rules to it

For some, it’s just for extra pocket money. For others, however, they are shifting real value to these platforms as part of their investment and retirement plans. For these people, it’s prudent to keep abreast of how SARS views these investments and transactions.  

Although cryptocurrency is not considered as a currency for purposes of South African income tax, it is regarded as an asset and SARS applies the normal income tax rules to it. According to these rules, Capital Gains Tax and Estate Duty are applicable.

Capital Gains Tax

The onus is on taxpayers to declare all cryptocurrency-related taxable income, including capital gains, in the tax year in which it is received or accrued. 

Gains may be regarded as capital in nature, as spelled out in the Eighth Schedule to the Income Tax Act for taxation under the Capital Gains Tax paradigm. This would also be true on death as you are deemed to have disposed of all your assets at the date of death, therefore triggering a Capital Gains Tax event.

Estate Duty

Since SARS does not view cryptocurrency as a currency, such as with the Rand, but rather as property, it will be treated as an asset in your estate for Estate Duty purposes. 

This is only possible though if your executor is aware of the cryptocurrency which you own, bearing in mind the anonymous nature of cryptocurrency and the manner in which you hold ownership of the cryptocurrency. 

It would be virtually impossible for your executor to trace your cryptocurrencies and properly account for them if they have not been brought to his or her attention. 

This article was written by Kenrick Newport, Capital Legacy.

Featured image: Kenrick Newport, Capital Legacy.