Cryptocurrency opened an exciting new investment frontier for many South Africans. However, when it comes to cash-out, many investors are uncertain how SARS will treat their profits.
Income or capital gain?
Are crypto gains treated as income and added to your gross income, or are they treated as a capital gain? The answer to this question depends on your behaviour and intention.
Below, we break down how SARS approaches crypto profits, how to determine whether you’re an investor or trader and how much tax you’re likely to pay.
Crypto is an “asset”, not “money”
SARS treats cryptocurrency as an asset, not a currency. This means you aren’t taxed when you buy or hold crypto, but every time you sell, swap, or spend it, you trigger a disposal that could result in a taxable gain or loss.
The question then arises: Was your profit capital in nature (i.e. an investment return) or revenue in nature (i.e. trading income)?
Capital vs income – what is the difference?
SARS does not automatically label your crypto profits one way or the other. Instead, it looks at your intention regarding the asset and trading behaviour.
The following factors help distinguish between the two:
| Capital gain (CGT) | Income (taxed at your marginal rate) |
| You bought crypto as a long-term investment | You trade frequently or speculate for short-term profits |
| You hold for months or years before selling | You buy and sell actively, possibly using trading bots |
| You have a few disposals, with records showing long-term intent | You have multiple trades, treat crypto like stock-in-trade |
If you bought crypto years ago and only recently sold it, SARS is likely to treat your gain as capital. If you are trading constantly or operate like a business, your profits are revenue. Regardless of how long you held the crypto for, you must be able to substantiate your intention, i.e. whether it was a long-term investment or a short-term trading strategy.
Calculating capital gains tax (CGT)
If your crypto profits are capital in nature, only 40% of the gain (if purchased in your personal capacity) is included in your taxable income. That portion is then taxed at your marginal income tax rate.
Every individual is entitled to an annual exclusion of R40,000 for capital gains. This means if your total capital gains for the year are R60,000, only R20,000 is taxable.
| Example: | |
| Selling price | R90,000 |
| Base cost (what you paid) | R30,000 |
| Capital gain: | R60,000 |
| Annual exclusion | – R40,000 |
| Taxable capital gain | R20,000 |
| Inclusion rate (40% which is then taxed at your marginal income tax rate) | R8,000 |
If you are a trader, it’s income
If you buy and sell crypto often, run trading strategies, or use crypto as part of your business, SARS will classify your profits as revenue income.
Therefore, the entire R60,000 profit is added to your gross income and taxed at your full marginal rate, not just 40%.
Keep detailed records
SARS requires you to keep proper documentation for every crypto transaction.
Your records should include the following:
- Dates of acquisition and disposal
- Purchase and selling price
- Wallet addresses and transaction IDs
- Exchange records or statements.
Most local platforms (like AltcoinTrader and Luno) allow you to export transaction histories. If you can’t prove what you paid, SARS can assume your base cost is zero and therefore tax the full proceeds.
Declare crypto gains correctly
Crypto disposals must be declared on your ITR12 return under:
- Capital Gains Tax: if you’re an investor, or
- Local Business/Other Income: if you’re trading.
Failing to declare crypto gains can result in understatement penalties and interest. With crypto exchanges now sharing data with SARS, it’s not worth the risk.
Tax Tuesday
Being tax efficient is an important part of great financial management. In this blog, a group of South African tax experts at AJM Tax share their tips and explanations on tax issues. Learn everything you need to know about tax, from deductions you never knew about to retirement savings and capital gains. The first Tuesday of every month is Tax Tuesday.
