This draft SARS guide provides guidance on some of the income tax and capital gains tax consequences that may arise for persons transacting in or holding crypto assets. The guidance is based on currently available information on crypto assets. Given the constant innovation and development in this technology, the principles considered in this guide are designed to be foundational, rather than overly specific. It is therefore incumbent upon the reader to always consider the detailed characteristics of the particular crypto asset and the particular transaction in question. These characteristics could fundamentally impact the income tax (including capital gains tax) consequences.
This guide does not deal with the treatment of crypto assets under the Value-Added Tax Act 89 of 1991.
The guide is a lengthy 50 pages. This article will highlight some key points of the guide.
Additionally, a second guide (manual) was recently published by the South African Reserve Bank and National Treasury for crypto assets and cross-border activities for public comment on 3 August 2026 for South Africa’s crypto asset holders and South African authorised crypto asset service providers. This will be dealt with in a separate article.
Anyone with comments applicable to the draft guide may email their comments to policycomments@sars.gov.za.
Relevant definitions
• “blockchain” means a digital, decentralised ledger that keeps a record of all transactions that take place across a peer-to-peer network and that enables the encryption of information (see also 3);
• “BTC” means bitcoin;
• “CAR Working Group” means the Crypto Assets Regulatory Working Group, formed in 2018 under the auspices of the Intergovernmental Fintech Working Group;
• “CGT” means capital gains tax, being the portion of normal tax attributable to the inclusion in taxable income of a taxable capital gain, determined under the Eighth Schedule, on the disposal of assets;
• “crypto asset” means a digital representation of value that is not issued by a central bank;
• “definition of ‘gross income’” means the definition of “gross income” in section 1(1) of the Act;
• “DLT” means distributed ledger technology;
• “Fiat currency” or “fiat” means a metal coin or paper currency made legal tender by a fiat (decree) of a government;
• “IFWG” means the Intergovernmental Fintech Working Group on Crypto Asset Regulation, originally established in 2016 by the National Treasury, the South African Reserve Bank, the Financial Sector Conduct Authority and the Financial Intelligence Centre and later joined by the National Credit Regulator, SARS and the Competition Commission.
• “IFWG CAR Position Paper” means the position paper on crypto assets issued by the Intergovernmental Fintech Working Group on Crypto Asset Regulation on 11 June 2021;
- Introduction
This guide considers selected provisions of the Act that are particularly relevant to crypto assets. It does not cover all the sections applicable to crypto assets and persons dealing with crypto assets, which, while not specifically referring to crypto assets or persons dealing in them, are nevertheless applicable.
The income tax system in South Africa is residence-based. This means that South African residents are, but for certain exclusions, subject to income tax on their worldwide income. This includes income derived both within and outside South Africa, including income and capital gains from crypto assets listed on foreign trade exchanges.
Non-residents are potentially liable for income tax if South Africa is the source of proceeds which are of a revenue nature or if the disposed asset meets the requirements of paragraph 2(1)(b)(i).
This guide focuses on the position of a South African tax resident taxpayer. However, the same principles apply to non-residents if the source or paragraph 2 requirements are met.
- Background
It is helpful to the reader if a background of key events is provided as listed below.
a. The government’s focus on crypto assets originated in 2014 with an initial public statement issued by the National Treasury as a joint initiative with the SARB, the Financial Services Board (known as such until its renaming as the Financial Sector Conduct Authority), SARS and the Financial Intelligence Centre. Members of the public were warned about the risks associated with the use of crypto assets and advised to exercise caution.
b. Also in 2014, the SARB issued the “Position Paper on Virtual Currencies” and identified risks associated with crypto assets, including money laundering, financing of terrorism, the lack of a legal and regulatory framework, the absence of consumer protection laws, and the inability to enforce the principle of finality and irrevocability, as is required in existing payment systems. The position paper confirmed that only the SARB is allowed to issue legal tender and that crypto assets are not considered official South African legal tender or money. Therefore, all activities related to the acquisition, trading or use of crypto assets are done at the end users’ sole and independent risk, with no recourse to the SARB.
c. In 2016 the Intergovernmental Fintech Working Group (IFWG) was established by National Treasury, the SARB, the Financial Sector Conduct Authority and the Financial Intelligence Centre. IFWG’s purpose is to:
• develop a common understanding among regulators and policymakers in South Africa of financial technology developments as well as the regulatory and policy implications for the financial sector and the economy;
• assist in developing and adopting a coordinated approach to policymaking in respect of financial services emanating from fintech; and
• foster responsible innovation in this field, with an end result of adopting a balanced and responsible approach to such innovation.
The National Credit Regulator and SARS joined IFWG in 2019, and the Competition Commission joined in 2020. The Crypto Asset Regulatory (IFWG CAR) Working Group was formed under IFWG to review South Africa’s position on crypto assets.
d. In 2018 SARS issued a media release clarifying that cryptocurrencies (being the terminology used at the time) are regarded as assets of an intangible nature and not currencies. Further, taxpayers are required to apply the normal tax rules (including existing case law to determine if an amount received or accrued is of a revenue or capital nature) and declare gains or losses as part of taxable income. Associated expenses may qualify for a deduction. It noted three types of transactions involving crypto assets, namely acquiring a crypto asset through mining, exchanging local currency for a crypto asset or vice versa, and exchanging goods or services for crypto assets.
e. Following public comment and engagement on the IFWG CAR consultation paper on Policy Proposal for Crypto Assets (issued in 2019), IFWG, through the CAR Working Group, issued the IFWG CAR Working Group Position Paper in 2020 and updated it in June 2021. The paper broadly recommended that crypto assets and crypto asset service providers be brought into the South African regulatory purview in a staged manner.
f. On 19 October 2022, the Financial Sector Conduct Authority declared a crypto asset to be a financial product under the Financial Advisory and Intermediaries Service Act, 2002. This, broadly speaking, means that persons providing financial services related to crypto assets must be licensed under that Act and are subject to the provisions of that Act. Persons providing services without authorisation face regulatory action by the Financial Sector Conduct Authority.
Conceptualising crypto assets
The term “crypto assets” is preferred in the South African context, as it encapsulates and extends to the functions of the crypto phenomenon. The term is also seen as a broader, or “umbrella”, term for different crypto-asset tokens, which may be classified as exchange or payment tokens, security tokens or utility tokens.
The IFWG CAR Working Group Position Paper adopted the following definition of “crypto asset”:
“A crypto asset is a digital representation of value that is not issued by a central bank but is traded, transferred and stored electronically by natural and legal persons for the purpose of payment, investment and other forms of utility and applies cryptography techniques in the underlying technology.”
This definition presupposes the inclusion of stablecoins and, by extension, global stablecoins but does not include digital representations of sovereign currencies and is therefore not regarded as legal tender or public money. The Financial Stability Board (FSB) defines a stablecoin as “a crypto asset designed to maintain a stable value relative to another asset (typically a unit of currency or commodity) or a basket of assets”.
In 2026, National Treasury released draft regulations in terms of the Currency and Exchanges Act, 1933, governing capital flow management. This document defines “crypto asset” as “a digital representation of value that (a) is not issued by a central bank, but is capable of being traded, transferred or stored electronically by natural and legal persons for the purpose of payment, investment and other forms of utility; (b) applies cryptographic techniques; and (c) uses distributed ledger technology”. These regulations also specifically include crypto assets in the definition of “capital” for purposes of capital flow management and exclude crypto assets from the definitions of “currency” and “foreign currency”.
How is ownership of a crypto asset transferred?
That question requires consideration of what actually happens during a transfer. A cryptoasset is functionally represented by a pair of data parameters, with the public parameter containing encoded information about the asset. In order to make a transfer within the cryptoasset system, the transferor typically modifies the public parameter, or generates a new one, so as to create a record of the transfer (including details of the transferee). The transferor then authenticates the record by digitally signing it with the private key.
At that point, the cryptoasset becomes linked to the private key of the transferee and is therefore under the transferee’s exclusive control. Once the transaction is recorded in the ledger, any attempts by the transferor to transfer the cryptoasset again should not be accepted by the consensus.
Although crypto assets are fungible in nature, in every application – whether an acquisition or disposal (fiat to Ether, BTC to fiat), an exchange between platforms (for example, Solana to Ethereum), swapping one crypto asset for another on the same exchange (for example, BTC for Ripple on Luno), or using crypto assets as a form of payment (exchanging BTC for groceries at a supermarket) – the crypto asset so used is generally disposed of in the process. As such, as a rule of thumb, there is usually a tax event associated with the application of crypto assets for one or both parties. If a taxpayer transfers crypto assets from one wallet to another wallet, both in the taxpayer’s name, the question of whether a tax event occurs is dependent upon the specific facts of the transfer, such as, but not limited to, the asset and the platform in question and the processes followed in effecting the transfer. It is therefore incumbent upon the taxpayer to understand these facts and circumstances in order to determine the tax consequences of such wallet transfers.
Tax nature of crypto assets
“Amount”
The word “amount” is frequently used in the Act. Although not defined in the Act, it has been the subject of various court cases. In WH Lategan v CIR, in relation to the definition of “gross income”, Watermeyer J explained as follows:
“In his Lordship’s opinion, the word ‘amount’ must be given a wider meaning and must include not only money but also the value of every form of property earned by the taxpayer, whether corporeal or incorporeal, which has a money value.”
While crypto assets are assets and not “money” or “cash”, each crypto asset clearly possesses a determinable value at every application and therefore has an amount. The amount of a crypto asset at a particular point in time equals its value at that same point. The value of a crypto asset is its market value, which generally represents the price agreed upon between a willing buyer and a willing seller in an open market.
Crypto assets are financial instruments.
The term “financial instrument” is defined in section 1(1) and “includes … any crypto asset”. The phrase “crypto asset” is not defined. Consequently, the general meaning of the word as commonly understood applies. The consideration in 3 aims to provide context to the ambit of this phrase.
The inclusion of a crypto asset in the definition of “financial instrument” carries significant tax implications. For example, financial instruments (and thus crypto assets) held by individuals or special trusts are excluded from the definition of “personal-use asset” and may therefore be subject to CGT on disposal. Furthermore, if held as trading stock, crypto assets on hand at the end of the year of assessment must be included in closing stock at cost, rather than the diminished value specified in section 22(1)(a).
Crypto assets are not “shares”, “currency” or “exchange items” or traded on a “recognised exchange”.
Shares
Although crypto assets are incorporeal assets, similar to uncertificated shares, they do not constitute “shares” or “equity shares” because they do not represent units of proprietary interests in any company. Therefore, the rules applicable to shares do not apply to crypto assets.
In particular, the statutory solution for shares contained in section 9C does not apply to crypto assets. Consequently, there is no “three-year rule” after which receipts and associated expenditure are deemed to be capital in nature in the context of crypto assets. Each tax event must therefore be considered on a case-by-case basis.
Currency and exchange item
The Act does not define “currency”. As already stated, crypto assets are not considered “currency” or “money” for income tax purposes. The question then arises whether crypto assets could be units of “foreign currency” for purposes of income tax, a term defined in the Act. If yes, then crypto assets would be classified as “exchange items” under section 24I.
Taxpayers subject to Section 24I would then need to calculate unrealised foreign exchange gains or losses while holding the crypto asset and realised foreign exchange gains or losses on realisation.
These gains would be included in or losses deducted from income in the relevant year of assessment when calculating taxable income as required under Section 24I.
Section 24I exclusively addresses foreign exchange gains and losses as calculated under that section. If an exchange item is disposed of at a gain or loss (distinct from a foreign exchange gain or loss), that gain or loss is dealt with under normal principles.
The preferred interpretation of the legal nature of crypto assets is that, although highly versatile and capable of negotiability, they are not “currency” and, consequently, not “foreign currency”.
Section 25D and paragraph 43 apply to translate “amounts in foreign currency”. Although crypto assets are not, themselves, amounts of foreign currency, a crypto asset may have a value that is determined and expressed in a foreign currency. In such a case, this value constitutes an amount in foreign currency, and the rules in section 25D and paragraph 43 apply in translating that amount to an amount in Rand.
The facts of a particular case must be considered against the requirements of, as appropriate, that section or paragraph to determine whether there is an amount in foreign currency that requires translation and whether section 25D or paragraph 43 is applicable.
Trade on a recognised exchange – market value rules in the Eighth Schedule.
The rules contained in paragraph 31 for determining the market value of an asset on a specified day apply for purposes of the Eighth Schedule. In relation to financial instruments that are held on capital account, specific rules are contained in paragraph 31(1)(a) if the financial instruments are listed on a “recognised exchange”. A “recognised exchange” for an exchange operating in South Africa means an exchange licensed under the Financial Markets Act. 51 Therefore, before paragraph 31 can be applied to a crypto asset held on capital account that is listed on an exchange operating in South Africa, it is necessary to consider whether that exchange is licensed under the Financial Markets Act.
Currently, crypto exchanges operating in South Africa are not licensed under the said act and thus cannot qualify as a “recognised exchange”. Therefore, paragraph 31(1)(a) is not currently applicable to crypto assets despite their inclusion in the definition of “financial instrument”. Similarly, paragraph 31(1)(a) does not currently apply to crypto assets traded on a foreign crypto exchange.
Consequently, paragraph 31(1)(g) is relevant. This paragraph provides that for any asset not covered by any of the preceding sub-paragraphs in paragraph 31, market value is “the price which could have been obtained upon a sale of the asset between a willing buyer and a willing seller dealing at arm’s length in an open market”.
In practice, the market value of a crypto asset may correspond to the price realisable on a crypto exchange at the time of the transaction.
Capital or revenue nature of crypto assets
One of the important tax principles requiring consideration is whether an amount is of a capital or revenue nature. The normal income tax rules apply to crypto assets when determining whether an amount is of a capital or revenue nature. The Act does not define this concept, but numerous court cases have considered whether an amount is of a capital or revenue nature and have provided principles and tests for consideration.
The facts and circumstances of each case are critical in making this determination. The onus of proving that an amount is of a capital or revenue nature, and therefore providing sufficient supporting evidence, rests on the taxpayer under section 102 of the TA Act. The various tests which must be considered when determining whether an amount is of a capital or revenue nature are considered in more detail in Chapter 2 of the Comprehensive Guide to Capital Gains Tax.
One of the uses considered is the disposal of a crypto asset for money or for another crypto asset. When considering whether the amount received or accrued from the disposal of a crypto asset is of a capital or revenue nature, one of the key tests is whether the asset was disposed of in the course of carrying on a business or a scheme of profit-making. This section of the guide briefly considers that test, some of the factors requiring consideration in its application, and some of the relevant case law. For more detailed information, the Comprehensive Guide to Capital Gains Tax can be consulted.
The taxpayer’s intention, sometimes alternatively referred to as the taxpayer’s purpose, in relation to the particular crypto asset is a very important factor to consider. The sale of an asset in the course of carrying on a business or in pursuance of a profit-making scheme suggests that the selling price is of a revenue nature. Conversely, if the sale of the crypto asset was the realisation of a capital asset to best advantage, the selling price is more likely to be of a capital nature.
It is important to consider the taxpayer’s intention at the time of acquisition, at the time of selling the asset, and whilst holding the asset, as a taxpayer’s intention regarding an asset may change over time. This consideration requires a broad view of all relevant facts and circumstances.
In conclusion, all the facts of a particular case must be considered when determining a taxpayer’s intention and whether amounts realised in relation to crypto assets are of a capital or revenue nature. Some of the factors to be considered include, but are not limited to, the following:
• The taxpayer’s reason why the crypto asset was acquired and disposed of. This is a subjective factor, and although often used as the starting point, the stated intention is not decisive without objective support from all the relevant facts and circumstances.
• The conduct and activities of the taxpayer in relation to the particular crypto asset.
• The nature of the taxpayer’s business and occupation.
• The frequency, or lack thereof, of involvement in similar transactions.
• The length of time the crypto asset was held and that was anticipated at the time of acquisition.
The statutory three-year time limit for determining the capital nature of an investment, as outlined in section 9C, applies solely to equity shares and participatory interests in collective investment schemes. Crypto assets are not subject to this three-year rule. Therefore, it is inappropriate to apply this benchmark with any measure of rigidity when determining the nature of gains realised from crypto assets. For example, if a taxpayer traded crypto assets with the intention of profiting from their disposal and subsequently sold a particular crypto asset five years after acquisition at a profit or a loss, that profit or loss would be of a revenue nature.
• No return or low return on investment. Some investments do not generate an income stream (such as interest, dividends, or rental income). Consequentially, any return on these investments is intrinsically linked to the growth of the investment vehicle itself. Krugerrands are a prime example; an investor can only realise returns by selling the gold. Therefore, circumstances in which no return or a low return prevails may be indicative of an intention to resell at a profit. However, the taxpayer’s expressed intention, along with all surrounding circumstances, must be taken into account.
Case law on Krugerrands provides some guidance on the type of circumstances in which the court has previously considered whether gains realised from the disposal of an asset, which yielded no return beyond its intrinsic value, were of a capital or revenue nature. The length of the holding period may have played a role, but as the cases illustrated, a long or short holding period is not conclusive in isolation. Although crypto assets are quite distinct from Krugerrands in nature, these cases are important as they confirm that reaching a conclusion requires considering all facts on a case-by-case basis, with no single factor being decisive.
Crypto assets do not generally offer a return on investment beyond what is intrinsic to their asset value. In this regard they are similar to Krugerrands, and therefore case law on the latter (see table above) may be useful. Investors wanting to maximise crypto asset investments and that regularly balance their portfolios to stay aligned with market fluctuations are likely to be regarded as trading on a revenue account for tax purposes.
• The nature of the risks associated with the investment. As an asset class, crypto assets occupy the upper end of the range of market volatility. When the intention of a taxpayer that opted to invest in crypto assets is to be determined, the volatility of the crypto assets may be illuminating. However, this factor is not decisive on its own. A taxpayer saving for his or her future retirement would generally be expected to choose safer investment options, especially if he or she is older and needs to conserve the capital already amassed. This position may change if the existing exposure to other asset classes indicates that an investment in a riskier class like crypto assets is warranted given their overall financial position. Otherwise stated, if the purpose is capital preservation, one would generally not invest in a very volatile class of asset that offers high risk for high reward. Nevertheless, some volatility may be justifiable from a risk diversification perspective when considering the taxpayer’s entire investment portfolio.
In the context of crypto assets, the value of which is highly volatile, a taxpayer demonstrating a low frequency of transactions and a long holding period may be able to sustain a capital intention. However, if the record of their past transactions indicates that they sold, exchanged, or moved the crypto assets to capitalise on market fluctuations, there is a stronger likelihood that they acted with a revenue intention.
Digital wallets on the Lightning network (or Solana, Nano, or Stellar, for example) are designed to facilitate very fast transaction processing, and crypto assets held in such wallets are typically subject to high-frequency transactions. This is often indicative of the revenue nature of crypto assets held in such digital wallets.
All such information would be relevant in discharging the onus that rests upon the taxpayer to substantiate their stated capital intention with objective facts.
The next article will further discuss the tax implications of crypto asset trading.