Cryptocurrencies are not regarded as a currency for income tax purposes or Capital Gains Tax (CGT) in South Africa. Yet, the South African Revenue Service (SARS) deems them to be assets of an intangible nature which "can be valued to ascertain an amount received or accrued as envisaged in the definition of "gross income" in the (Income Tax) Act."

In a recent media statement on its stance on how tax issues related to cryptocurrencies will be treated, SARS maintains it will continue to apply normal income tax rules to cryptocurrencies based on an existing tax framework.

As a result, affected taxpayers are expected to declare cryptocurrency gains or losses as part of their taxable income. The disclosure is quite significant considering that taxation of cryptocurrencies is still a topical issue globally.

Many countries are yet to accept and give the evolving technology a place in their books.

In those countries, those dealing in cryptocurrencies tend to go about their transactions taking advantage of the laxity as a recourse for being taxed.

"The latest guidance by SARS does show that the tax authorities recognise digital currencies like Bitcoin as something that plays an important and growing part of the financial landscape," says Bitcoin expert, Werner van Rooyen. "With all the excitement about digital currencies like Bitcoin - which really started exploding in 2017 - many investors have been asking questions about how their gains should be taxed. It's not a matter of tax avoidance, since Bitcoin is a terrible mechanism for crime and tax evasion, but rather a question of how gains and losses on digital currencies should be taxed."

In line with SARS's statement, van Rooyen is of the view that much of the existing tax laws should cover gains and losses no matter what the underlying financial instrument or asset is.

He likens it to the situation in the United States where Bitcoin is seen to be a property which will be taxed as capital gains and losses in more instances (or for holding the asset for a shorter time) than in South Africa.

He says: "There are some countries with certain exemptions, but for the most part, tax authorities around the world take the view that if you realise gains (or losses) on any sort of transaction, that it should be taxed according to the specific country's tax rules, which is basically what the SARS' notice said."

SARS adds that while there is a plan to review the VAT treatment of cryptocurrencies, the tax agency will not require VAT registration for vendors who supply cryptocurrencies.