South Africa has just published the Taxation Laws Amendment Act and according to it, all kind of cryptocurrencies became financial instruments for the purposes of tax law. The tax law consists of 132 pages that include a large number of technical, small and mostly routine updates of the laws that are going back as far as 1962. The new amendments were made just recently and were signed by the president of South Africa Cyril Ramaphosa on Wednesday. Since now cryptocurrencies are considered as financial instruments, they will fall into the same category as futures contracts, promissory notes, and derivatives based on underlying commodities as explained by TopForexBrokers.co.za webpage administrator to us. For the taxing purposes, the value of financial instruments is determined by the price that could be obtained in a transaction on the open market.
What does the hobby status mean?
According to the separate update of the Income Tax Act (Section 20A) cryptocurrencies are listed with such activities that may involve a lot of money but also may not be conducted on an actual business basis, for example, betting on sports or even showing animals in competitions. It means that cryptocurrency trade will not be posed with the differentiation between losses that might follow trading activities of a taxpayer. Instead, the losses will be perceived as a result of the taxpayer’s hobbies or social activities. As cryptocurrencies have a hobby status it means that the losses that will result in trading cryptos, may not only be offset against profits. Bitcoin transactions will also allow citizens of South Africa to reduce the amount of taxes that one has to pay on any other income. Because of this, it might be a good time for South Africans to turn to cryptocurrency trading, you can learn more about Bitcoin trading in South Africa here to see how to get started. For a long time, cryptocurrencies were not considered as real money by the Reserve Bank of South Africa. The officials preferred to call them crypto-assets or crypto tokens. Hence, the laws that were regulating financial instruments were not imposed on them. In general, there was no regulatory framework for cryptocurrencies in the country. Several weeks ago it was announced that South Africa was going to overview the general framework and financial laws, because they were not able to deal with the new challenges that the digitalization of the financial sector brought. Now as it seems the process has started and cryptocurrencies are getting a regulatory framework for the payment systems and taxation.