Taxand South Africa presents the tax and exchange control implications of Bitcoin.
With virtual currencies such as Bitcoin becoming ever more popular and accessible, it is important that South African taxpayers carefully consider the tax and exchange control uncertainties that accompany the incorporation of these relatively new systems into businesses and/or investment portfolios. We highlight below some of the tax and exchange control consequences arising from transactions involving Bitcoin. We have not considered the tax and exchange control consequences of the mining of Bitcoin, as this will be considered in a separate article.
On 3 December 2014, the South African Reserve Bank (SARB) issued a Position Paper on Virtual Currencies (the Position Paper) indicating that Bitcoin is a digital representation of value that can be digitally traded and functions as a medium of exchange, a unit of account and/or a store of value, but does not have legal tender status (our emphasis). It is therefore not, of itself, subject to regulation by the SARB. South African residents nevertheless remain subject to South Africa’s exchange control regulations in general, and should take care that they do not unwittingly contravene any of these regulations in their dealings with Bitcoin. It remains to be seen how the SARB’s approach to Bitcoin develops over time.
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Given the uncertainty and potentially significant tax and exchange control implications that may arise in the context of trading in and using virtual currencies such as Bitcoin, it is very important for any party to a transaction that involves Bitcoin to obtain advice on their specific circumstances prior to implementation.
