Part2: Bitcoin- the tax effect

We continue our discussion concerning the digital financial revolution headlined by emergence of Bitcoin as a medium of exchange. Today we look at the tax implications of trading with and in Bitcoin, and buying or selling cryptocurrencies.

On 6 April SARS issued a media release elaborating on its stance on Bitcoin and other cryptocurrencies and the tax effect. In the statement SARS reiterated that they will ‘’continue to apply the existing income tax rules to cryptocurrencies’’ and they expect taxpayers to declare cryptocurrency gains and losses as part of taxable income. Like with any other income, the responsibility lies with the tax payer to declare their income; the consequence of non-compliance is penalties and interest.

SARS felt it is not necessary to introduce new guidelines regarding cryptocurrencies and the consequent tax effect as current legislation can be used to enforce tax compliance. The South African Income Tax Act does not define what ‘’currency’’ is. Although cryptocurrencies like bitcoin are forms of digital currency and can be used as currency or a medium of exchange; they are not legal tender in South Africa. Thus SARS says it does not regard them as a currency for income tax purposes or Capital Gains Tax. Instead SARS considers cryptocurrencies as intangible assets, the same way shares, unit trusts etc. are regarded under the Income Tax Act. You own the asset, and have proof of ownership but it cannot be physically encountered by our natural senses.

So what happens when you produce and or sale goods in exchange for Bitcoin? Well the Income Tax definition of gross income is cash or otherwise, received by or accrued during the period of assessment; excluding amounts of a capital nature. Thus if you do use Bitcoin as a medium exchange in your trade, you will be required to declare this income; as income can take any form. For instance, living in a company house, or getting a car as a service award are all instances of receiving income payable under Income Tax regulations; thus surely Bitcoin is no different. Thus it is a matter of ascertaining market value of these receipts in local currency at for income tax reporting purposes. This also means that taxpayers can claim expenses associated with Bitcoin accruals or receipts as long as this expenditure is in the production of taxpayer’s income or for the purposes of trade. This means that if you also spent Bitcoin in production of Bitcoin income, you can also claim these expenses on your tax return.

There are instances where cryptocurrencies can be taxed under Capital Gains Tax, it is a matter of determining; using current legislation whether an accrual or receipt is revenue or capital. An example is if you gain bitcoin through mining or exchanging normal currencies for these; with the intention of holding the currency in anticipation of an appreciation of value. This results in a capital gain or loss if when you sell the Bitcoin, you gain more currency or less than when you initially bought the cryptocurrencies. This obviously works the same way as other assets like shares or unit trusts. On the other hand if you are a Bitcoin trader, then Bitcoin becomes your stock and income earned is of a revenue nature.

By |2018-04-26T13:34:30+02:00April 26th, 2018|General|0 Comments

I run a business and I have never submitted tax what should I do 

Every business that is liable for tax under the Income Tax Act, 1962 is required to register with SARS as a taxpayer within 21 days of becoming liable.  This registration can be done once for all different tax types (VAT, PAYE etc) using the client information section link on the SARS website.

If a business has been running and not paying tax it will have to register as a taxpayer as soon as possible. SARS does not only impose penalties for late registration and late submission of tax returns it also imposes penalties for late registration where the company should have registered as a taxpayer. The more the company delays in registering for tax and submitting returns the bigger the liability might just get. In the case that the business has been making losses, nil returns will be submitted for the years where no tax returns were done. Penalties and interest may be charged by SARS for the years where tax is payable to SARS.

In the event that the company finally registers as a taxpayer and all outstanding returns are submitted with the result being amounts due to SARS including penalties and interest and the taxpayer cannot settle the amounts at one go, payment arrangements can be made with SARS.

If your business finds itself in a situation where registration as a taxpayer was not done in time, the best will be to seek professional advice.  Call SARS and speak to a consultant who will gladly assist or you can walk into any SARS branch closest to you or speak to your accountant or tax practitioner. They will be able to assist with the registration and submission of all outstanding tax returns.

By |2018-03-28T12:45:56+02:00March 28th, 2018|Entrepreneurship|0 Comments

4 simple things that you need to do to everyday to become a better entrepreneur

success-as-an-entrepreneur-600x280When your business becomes successful, it does not mean that it is time for you to sit back and relax. Successful entrepreneurship is a constant work. You do not stop working on it. It requires consistent effort.

You have to work on your business on a daily basis to become the best version of yourself, no matter how successful your business is. Success in entrepreneurship is not an end destination.

So, here are four things you can do every day to become a better entrepreneur:

Start your day positively.
Feed your mind with positive thoughts from the minute you wake up. Successful people maintain a positive focus in life no matter what is going on around them.

Plan the night before, everyday.
Put down 1 to 3 most important things to get done on your to do list and complete them.

Ask yourself how you can make today better than yesterday.
Find time to come up with ideas on what you can do today that can make it better than yesterday.

Be clear about your intentions.
Whatever that you intend to do today, stick to it and complete it. Do not let anything distract you. One of the best ways to ruin a productive day is to give into distractions. Becoming a better entrepreneur starts with planning and sticking to that plan.

By |2016-11-01T10:20:10+02:00February 29th, 2016|Entrepreneurship|0 Comments

Habits that successful people follow 

To achieve high levels of success, you must start developing the habits of the highly successful.Habits

No matter where you are in life, there is always more to reach for.  When you constantly strive to become a better person and invest in your future daily, you grow as an individual. When you grow, your value increases. The more your value increases, the more successful you will become – and it all starts with your habits.

We all know that not every habit is a good one, but one needs to have a desire to develop a good habit in order to succeed.

The first thing to do when working to towards success is changing the habits that do not add any value to your life and learn how to direct your energy towards the most rewarding tasks in your life.

Take a look into your life and check if the things that you are doing have the potential to bring the most reward to you and your business. If not, then it is time to change your habits.

Prioritizing is one habit you need to adopt if you want to succeed in doing business. High achievers never lose sight of what their major goal is. Think of what the most important thing to achieve at the moment is, and work hard to achieve it. Work hard every day and do something that brings you closer to achieving your goal.

To be successful you need to have a positive attitude towards everything. Turn every negative thing into positive. A huge number of successful entrepreneurs have experienced some set back or negativity somewhere in their journeys that could have made them quit. But instead of quitting they had a positive mental attitude about themselves and their abilities, which gave them the power needed to continue along and reach their goals.

 

By |2016-11-01T10:20:21+02:00September 14th, 2015|Business Resources, Entrepreneurship|0 Comments

Entrepreneurial lessons from Zanzibar part 1

Having recently visited Zanzibar, Tanzania for my honeymoon, I was struck at how different it must be to run a business on an island in an African state. Here is part 1 of my observations:

There is a huge copycat mindset in Africa when it comes to small business. If one person starts a business and is perceived to be doing well, others copy them to the letter and open their shop right next door. We observed this a lot in Zanzibar with up to 6 shoe repair shops all next to each other in the main road. Similarly in other areas are car repair shops, bed shops and second hand appliance shops all huddled together in the same street. If you need to be the same as others, then at least move your business to another part of town where you can find customers at their place of need rather than expect them to come to you and then compete with other similar businesses.

The concept of Niche is just not heard of. All businesses are the same, the signage, the layout and content of their shops. From small street vendors to larger store in Stone Town, they seem to be made in a franchise environment. By simply changing the way you do business to be different, you begin to attract a different type of customer and begin to carve out a niche for your business, this lessons the stress of fighting for the ‘share of wallet’ that copy-cat businesses do.

The idea of bartering in an age old trade mark of Africa: People just love to barter and haggle about price and quality. I have observed this to be a national past time in Holland, but it becomes a survival technique in Africa. The only problem is that they need to barter and haggle across many different language and currency barriers. Keeping the different conversion rates in your head as both business owner and customer is often just too taxing to conclude a sale and the customer walks away. The need for a fixed displayed price in both local currency and USD would make it an easier transaction. Shops that do this, rarely need sales people, the products speak for themselves and the price is what it is. As soon as you discount your price, you are actually displaying a lack of confidence in your product.

By |2016-11-01T10:20:34+02:00June 6th, 2014|Business Resources, Entrepreneurship|0 Comments

Online Coaching for all

The Entrepreneur Incubator has retooled some of our offerings and we are now able to offer coaching, education and support for Entrepreneurs across the globe online at a massively low cost.
Our webinars (online seminars) will be offered on a regular basis with up to 3 presented each week. These together with eBooks and downloadable notes and videos we aim to reach a wider audience of emerging business owners at a more affordable cost.
Our FREE webinars will be run weekly and cover topics of a general nature that will assist people to gear themselves up to start a business then moving on to our paid-for webinars that offer more meat and fat to develop both you and your business.
Check out our offering each week here and signup for the next online course that could just give you that boost you need in business.

Our FREE webinars will be run weekly and cover topics of a general nature that will assist people to gear themselves up to start a business then moving on to our paid-for webinars that offer more meat and fat to develop both you and your business.

Check out our offering each week here and signup for the next online course that could just give you that boost you need in business.

By |2013-02-24T14:33:28+02:00February 24th, 2013|EI Clients, Entrepreneurship|0 Comments