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Taxes
A South African law firm has published a short essay on the proposed tax legislation for cryptocurrency in the country. Cox Yeats Attorneys, a Durban-based firm, argues that the Taxation Amendment Bill, published by the National Treasury in July, will be
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Law Would 'Significantly Deter' Crypto Use
South Africa's National Treasury published in drafting a virtual currency law on July 16 in bitcoin and other cryptocurrencies. The bill is the country's first attempt to regulate the use of crypto assets, which have been largely unregulated until now. It includes changes to both the Income Tax Act and the Value Added Tax (VAT) Act for cryptocurrency taxation purposes.
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Wade Ogilvie, a cox partner at Cox Yeats Attorneys, "Welcoming the use of cryptocurrency in South Africa for both trading and investment purposes" Tribune. Cryptocurrencies as "financial instruments," he said. Loans in the same category as loans, debts and common stocks.
Ogilvie said this could have "a ripple effect throughout" South African tax legislation. He cited Section 22 of the Income Tax Act, which he also points to another section of the same law that specifically excludes financial instruments for this purpose.
Cryptocurrency may not benefit from their undisposed cryptocurrency using the valuation method contemplated in Section 22, "Ogilvie said.
As the 11D of the Income Tax Act, which provides an undertaking for companies that invest in research and development in South Africa, specifically excludes the creation or development of financial instruments. This would include companies who mine or develop cryptocurrencies. "
Growing Cryptocurrency Adoption
Bitcoin adoption has grown sharply in South Africa over the past few years, in spite of regulatory concerns and falling cryptocurrency prices. The country, Africa's most sophisticated economy, has been consistently ranked as the highest in the world for "interest in" bitcoin, "according to Google Trends data.
Regulators have been largely cautious in their approach to cryptocurrency, as they are trying to avoid triggering the global financial industry. The South African Reserve Bank, has warned that the cryptocurrency is not "legal tender."
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Taxpayers in the country "are required to declare their gains and losses" involving crypto asset transactions. The South African tax regulator will "look at the intention of the taxpayer when determining whether the income is capital or revenue in nature."
Bad Law
Ogilvie said the draft law will also seek the acquisition of the existing income tax liability that "deals with the ring-fencing of the impairment of certain trades." This, again, will shortchange digital currency investors.
He wrote:
Although taxpayers who trade in cryptocurrency may set their own losses from income derived from other trades.
The bill includes that defining "financial services" as the "issue, acquisition, collection, buying or selling or transfer of ownership of any cryptocurrency."
"Cryptocurrency is not considered legal tender", "VAT vendors" providing wholly tax-deductible supplies "who accept cryptocurrency" as a form of payment will not be able to on-sell the cryptocurrency and claim the full input supplies mixed supplies, "Ogilvie explained. "Accordingly, only a portion of the input will be deductible."
He said that in his current form, the Taxation Laws Amendment The use of cryptocurrencies is on the rise and it may be that (the) Treasury, and the Reserve Bank, are forced to address the insurgence sooner than expected. "
What do you think about the proposed cryptocurrency taxation law in South Africa? Let us know in the comments section below.
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