The South African Revenue Authority (SARS) has issued draft guidelines on the taxation of encrypted assets, which are intended to explain how digital assets are subject to taxation rules under existing tax laws. The document is not a new tax law, but an interpretation of the existing provisions of the Income Tax Act 1962, which the public may submit by 31 August 2026.

Encrypted assets are not treated in monetary terms

The draft extends to SARS, which has a calibre, i.e. an encrypted asset that is not a legal currency or foreign currency. The tax authorities regard it as an intangible asset, and the related proceeds are generally placed within the framework of income tax and capital gains tax, rather than under foreign exchange rules.

The draft states that the specific type of tax to be applied depends on the facts of each case. Where taxpayers deal frequently, the proceeds are more likely to be treated as income tax; where they are held on a long-term basis and can be supported by the facts, the capital gains tax may apply.

Multiple chain activities are included

The document lists a wide range of potential taxable acts, including sales for French currency, currency exchange and the purchase of goods or services with encrypted assets. Mining, pledge, air drops, hard fork and DeFi activities were also included in the draft.

  • Selling encrypted assets for French currency.
  • Currency exchange may be taxable
  • Encrypted payment of goods or services is also included.

SARS states that when determining the nature of the tax, the focus is on the taxpayer ' s holding purpose, the time of holding, the frequency of the transaction and the plan of use upon purchase. The tax authorities also noted that the intention of the taxpayer to hold might change over time, and therefore the tax treatment of the same asset might differ at different stages.

The draft also mentioned that if an encrypted asset was given to another person free of charge and did not receive value for it, the act might involve a gift tax, since an encrypted asset could be considered a form of property.

CARF reporting cycle specified

SARS reiterated that taxpayers were required to declare gains or losses from encrypted assets in the relevant tax year. Failure to declare taxable and encrypted income may expose them to interest and fines. Tax authorities can also access third-party financial data in tax verification.

South Africa has adopted the Encrypted Asset Reporting Framework CARF. Under this framework, encryption service providers are required to collect and send some user and transaction data to SARS, the first reporting cycle being from 1 March 2026 to 28 February 2027.

Individual taxpayers do not submit CARF reports directly and are still required to disclose their own encrypted transactions in their individual income tax returns. Chainalysis previously stated that South Africa received approximately $26 billion in the value of encrypted assets over the one-year period of its statistics, indicating that the local market was still growing.