Although cryptocurrency is not considered as a currency for purposes of South African income tax, it is regarded as an asset and Sars applies the normal income tax rules to it. According to these rules, capital gains tax and estate duty are applicable.
The onus is on taxpayers to declare all cryptocurrency-related taxable income, including capital gains, in the tax year in which it is received or accrued. Gains may be regarded as capital in nature, as spelt out in the eighth schedule to the Income Tax Act for taxation under the capital gains tax paradigm. This would also be true on death as you are deemed to have disposed of all your assets at date of death, therefore, triggering a capital gains tax event.
Alex Simeonides, Capital Legacy 25 Mar 2021
Since Sars does not view cryptocurrency as a currency, such as with the rand, but rather as property, it will be treated as an asset in your estate for estate duty purposes. This is only possible though if your executor is aware of the cryptocurrency, which you own, bearing in mind the anonymous nature of cryptocurrency and the manner in which you hold ownership of the cryptocurrency. It would be virtually impossible for your executor to trace your cryptocurrencies and properly account for them if they have not been brought to his or her attention.
As one of the leading providers of wills and estates, we have our finger on the pulse and are working on a solution with regards to your cryptocurrency assets at the point of estate administration that will provide both you and your heirs with peace of mind. Keep an eye on our social pages, website and the media for more updates coming soon.
Kenrick Newport is the national manager, succession planning at Capital Legacy
