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.
