Abstract
Cryptocurrencies are revolutionary digital currencies used by people on a peer to peer network. Cryptocurrencies are predominantly used as a payment method in business transactions. However, challenges arise with cryptocurrency borne transactions due to the lack of universal accepted classification of cryptocurrencies, the result of which leads to unintended tax consequences for cryptocurrency users. This article examines the recent amendment to the Value-Added Tax (VAT) 89 of 1991 pertaining specifically to the VAT treatment of cryptocurrencies in South Africa. Currently, transactions in cryptocurrencies are deemed to be financial services in South Africa. This means that a supply of any cryptocurrency in South Africa is exempt from VAT. This article makes a comparison with the Australian legislative framework to determine how cryptocurrencies are treated for VAT/GST purposes in that country. Although the move to regulate cryptocurrencies is welcomed, this article argues that cryptocurrency activities are incorrectly legislated as financial services in the VAT Act.
Highlights
Since its inception in 2009, cryptocurrencies have revolutionised money markets, the financial sector and electronic commerce transactions while potentially creating new business models in the process
This article makes a comparison with the Australian legislative framework to determine how cryptocurrencies are treated for Value-Added Tax (VAT)/GST purposes in that country
A juxtaposition of the South African legal framework and the Australian legal framework pertaining to the VAT/GST treatment of cryptocurrencies reveals that the South African legal system has deficiencies when it comes to the VAT treatment of cryptocurrencies
Summary
Cryptocurrencies are revolutionary digital currencies used by people on a peer to peer network. Cryptocurrencies are predominantly used as a payment method in business transactions. This article examines the recent amendment to the Value-Added Tax (VAT) 89 of 1991 pertaining to the VAT treatment of cryptocurrencies in South Africa. Transactions in cryptocurrencies are deemed to be financial services in South Africa. This means that a supply of any cryptocurrency in South Africa is exempt from VAT. This article makes a comparison with the Australian legislative framework to determine how cryptocurrencies are treated for VAT/GST purposes in that country. The move to regulate cryptocurrencies is welcomed, this article argues that cryptocurrency activities are incorrectly legislated as financial services in the VAT Act
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