Is currency too cryptic for vat?
14 July 2025
The Value-Added Tax Act No. 89 (1991) regards certain activities pertaining to cryptocurrency as financial services. But what if the supply involves a crypto asset and not cryptocurrency?
What’s currency got to do with it?
Crypto assets are not currently recognised as legal tender by the South African Reserve Bank and cannot be classified as money for VAT purposes. Crypto assets are a digital representation of value.
The cryptogenic landscape has more to offer than just cryptocurrency. The difference between cryptocurrency and crypto assets lies in its scope. Cryptocurrency is an example of one type of crypto asset. Crypto assets are a digital representation of value or medium of exchange which also includes stablecoins, non-fungible tokens (“NTFs”), central bank digital currencies (“CBDCs”), and security tokens.
It’s all about character
In the absence of specific provisions in the VAT Act, the normal rules will apply. This will require the vendor to understand the nature and function of the crypto asset, and the role of the vendor.
According to the Intergovernmental Fintech Working Group (“IFWG”), crypto assets can be classified as:[1]
- Exchange or payment tokens – Tokens used as a means of exchange or payment for goods and services;
- Security tokens – Tokens that provide rights of ownership or rights to claim funds or profits;
- Asset-backed tokens – The value of the token is determined by the value of underlying assets such as commodities; and
- Utility tokens – Tokens that can be redeemed to access a specific product or service.
The role that vendors play in a crypto asset transaction can be anything from providing access to an online asset trading platform, providing services related to trading, conversion or exchange of crypto assets into fiat currency (i.e. normal currency) or other crypto assets and vice versa, as well as acting as a payment partner.
Now what?
The charging section requires output tax to be imposed on the supply of goods or services in the course or furtherance of any enterprise carried on by a vendor. Output tax should be imposed at the standard rate of VAT (currently 15%), unless one of the zero-rating provisions of section 11 of the VAT Act apply. Exempt supplies, such as the supply of financial services, are excluded from the charging section as exempt supplies are not part of a VAT enterprise.
With effect form 1 April 2019, the Value-Added Tax Act no. 89 (1991) (“VAT Act”) regards certain activities pertaining to cryptocurrency as financial services.
Notably, the VAT Act only includes the issue, acquisition, collection, buying or selling or transfer of ownership of cryptocurrency as “financial services”. The supply of “financial services” by a vendor constitutes an exempt supply. However, if the consideration payable in respect of the crypto asset activities is any fee, commission, merchant’s discount or similar charge, the service is not financial services and will be a taxable supply of services.
The VAT Act is silent on the implications of the supply of other crypto assets. Due to the lack of global or domestic guidance regarding the exact nature of crypto assets, there is currently no uniform accounting and tax (including VAT) treatment prescribed in a number of countries.
To determine the VAT treatment of the activities carried on in respect of crypto assets, the terms and conditions of the contractual agreement between the service provider and the customer is of significance.
Agree and don’t disagree
Vendors should carefully consider the description of the services to be provided, as well as the consideration to be charged for these services. When describing the services, it is best to consider each activity in the supply chain.
Example Where a vendor usually only accepts fiat money as payment for goods supplied, but allows a specific customer to settle the purchase price with crypto assets, the activities in the supply chain would be as follows:
The potential VAT consequences of the above activities are:
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Making sense of it all
It is impossible to provide a comprehensive analysis of all the possible types of transactions involving crypto assets. It is expected that the South African Revenue Service will provide more guidance in the foreseeable future.
Until then, it is important to realise that not all transactions involving crypto assets will be financial services. In the absence of specific provisions in the VAT Act, vendors should carefully consider the activities being carried on, and seek input from professional tax advisers when drafting crypto-related agreements or entering into transactions involving crypto assets.
Contact our Indirect Tax team if you need assistance with any of your indirect tax affairs.
Author
Evádne Bronkhorst, Senior Manager
1IFWG. 2021. Position paper on crypto assets. [Downloaded: 2025-06-25]. [Online] Available from: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.ifwg.co.za/IFWG%20Documents/IFWG_CAR_WG-Position_Paper_on_Crypto_Assets.pdf
*This article was published in African Mining: Is currency too cryptic for VAT? - African Mining Online
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