Bitcoin and eSwatini Income Tax Order 1975 (King's Order in Council No. 21 of 1975)

Abstract

Bitcoin usage and growth has gradually had an impact on the virtual world and financial markets of mostly South Africa, which has resulted in the Cryptocurrency being gradually adopted by emaSwati. The central bank of eSwatini has therefore noted that there have been reported cases of Bitcoin usage in the kingdom of eSwatini. However, with this growth the eSwatini Revenue Services has not made any statement or pronounciation on the possible tax treatment of the Cryptocurrency whilst on the other hand the central bank of eSwatini has begun the process of conducting research on how to regulate Cryptocurrencies in eSwatini. This situation in eSwatini has therefore presented us with a gap in literature and therefore an opportunity to conduct this study ensued on how Bitcoin can be treated for Income Tax purposes by the eSwatini Income Tax Order. This study has been conducted by focusing mainly on the direct tax consequences of the Cryptocurrency in eSwatini and South Africa, which may arise, and an examination of possible gaps in the eSwatini jurisdiction since there has been no pronounciation by the eSwatini Revenue Authority. Furthermore, brief lessons from the United Kingdom and the United States of America’s position on the tax treatment and regulation of the Cryptocurrency have been explored. The UK and USA have been selected for this study because they have more advanced regulations in relation to Cryptocurrency and a higher prevalence of Cryptocurrency transactions than both eSwatini and South Africa. Furthermore, in conducting the study South Africa has been selected because the common law of both South Africa and eSwatini is relatively similar and has been adopted from both the Roman-Dutch and English common law. A further preferred feature about the South African jurisdiction is that it shares a border and a similar socio economic environment to that of eSwatini. Having identified the gaps in the eSwatini jurisdiction the study has therefore concluded that the findings on the gaps necessitate the application of tax on worldwide income, and the implementation of Capital Gains Tax to the Swati tax legislation. Furthermore, the study has uncovered that in order to achieve this the eSwatini Revenue Authority must seek to find a proper classification for Cryptocurrency which will aid in the application of tax on the new digital currencies.