Crypto tax glossary

The key crypto-tax terms, defined in plain English with South African context.

1099-DA: A US tax form on which brokers report customers' digital-asset proceeds and, increasingly, cost basis to the IRS.
Acquisition: The point at which you obtain a crypto asset and establish its base cost — by buying, receiving or otherwise gaining ownership.
Airdrop: A distribution of free tokens to wallets, generally taxed as revenue income at the tokens' rand value when received.
Annual exclusion (R40,000): The first R40,000 of an individual's net capital gain in a tax year that is excluded before the inclusion rate is applied.
Base cost: The amount you are allowed to deduct from proceeds on disposal — usually what you paid for the crypto plus directly related acquisition costs.
Bed and breakfasting: A UK matching rule: disposals are matched to reacquisitions of the same token within 30 days, countering loss-harvesting by quick rebuys.
Blockchain: A shared, append-only ledger of transactions maintained across many computers, providing the immutable record behind most crypto assets.
Bridge: A protocol that moves crypto value between blockchains; bridging may be treated as a disposal depending on the mechanism used.
Capital Gains Tax (CGT): Tax on the profit made when you dispose of a capital asset, such as crypto held as a long-term investment, for more than its base cost.
Capital vs revenue: The core question of whether a crypto gain is a capital gain (CGT) or revenue income (income tax), decided mainly by your intention.
CARF (Crypto-Asset Reporting Framework): An OECD global standard for the automatic exchange of crypto-account information between tax authorities, with reporting expected from 2026.
CEX (Centralised Exchange): A company-run crypto exchange that holds custody of user funds, provides statements, and increasingly reports user data to tax authorities.
CGT inclusion rate: The portion of a net capital gain that is included in taxable income and taxed at your marginal rate — 40% for individuals.
Cost basis tracking: The ongoing practice of recording the base cost of every acquisition so gains and losses can be calculated correctly on disposal.
Crypto lending: Lending out crypto to earn interest, where the interest is generally revenue income and depositing or withdrawing may have tax effects.
DAC8: The EU's directive aligning with CARF to require automatic reporting and exchange of crypto-asset information among member states.
Deemed disposal: A disposal treated as occurring for tax even without a sale — for example on emigration, death, or ceasing to be a tax resident.
DeFi (Decentralised Finance): Financial services built on public blockchains without intermediaries — lending, trading and yield — with complex, often self-reported tax.
DEX (Decentralised Exchange): A peer-to-peer exchange running on smart contracts where users swap tokens directly from their wallets; each swap is a disposal.
Disposal: A taxable event that occurs when you part with a crypto asset — by selling, swapping or spending it — triggering a gain or loss calculation.
Eighth Schedule: The part of the South African Income Tax Act that sets out how Capital Gains Tax is calculated, including base cost, proceeds and exclusions.
Fair market value (FMV): The price a crypto asset would fetch in an open-market transaction at a given time, used to value non-cash receipts and disposals.
FBAR: A US filing reporting foreign financial accounts; its application to crypto-only accounts has been debated and is evolving.
FIFO (First-In, First-Out): A cost-allocation method where the first units of an asset you acquired are treated as the first units you dispose of when calculating gains.
FSCA (Financial Sector Conduct Authority): South Africa's market-conduct regulator, which declared crypto assets a financial product and licenses crypto service providers.
Funding rate: Periodic payments exchanged between long and short holders of a perpetual contract to keep its price near spot; relevant to trading income.
Futures: Contracts to buy or sell crypto at a set price on a future date; gains and losses are generally revenue, given their speculative nature.
Gas fee: The fee paid to process a transaction on a blockchain, which can form part of base cost on acquisition or reduce proceeds on disposal.
Gwei: A small denomination of Ether (one-billionth of an ETH) commonly used to price Ethereum gas fees.
Hard fork: A permanent split of a blockchain into two chains, sometimes giving holders new coins on the new chain with tax consequences.
HIFO (Highest-In, First-Out): A cost method that disposes of the highest-cost units first to minimise the reported gain — a form of specific identification.
Impermanent loss: The reduction in value a liquidity provider can suffer when pooled token prices diverge, which becomes real on withdrawal.
ITR12 (income tax return): The annual income tax return individuals file with SARS, where crypto income and capital gains must be declared.
LIFO (Last-In, First-Out): A cost method where the most recently acquired units are treated as the first disposed of — not generally accepted for crypto in South Africa.
Liquid staking: Staking crypto while receiving a tradeable token representing the staked position, which can itself create disposal questions.
Liquidity pool: A pool of tokens that powers a decentralised exchange; depositing and withdrawing can be disposals, and fees earned are income.
Marginal tax rate: The income-tax rate that applies to your next rand of taxable income — the rate at which crypto revenue income and included gains are taxed.
Mempool: The waiting area of unconfirmed transactions that have been broadcast to a blockchain network but not yet included in a block.
MEV (Maximal Extractable Value): Value that validators or bots can extract by reordering or inserting transactions in a block; relevant for traders facing slippage and failed swaps.
Mining: Using computing power to validate proof-of-work transactions in exchange for block rewards, generally taxed as revenue income on receipt.
Minting: Creating a new token or NFT on a blockchain; the income and cost consequences depend on whether you mint as a hobby or a business.
NFT (Non-Fungible Token): A unique blockchain token representing ownership of a specific item; buying, selling and minting NFTs all carry tax consequences.
Non-custodial wallet: A wallet where you alone hold the private keys, in contrast to a custodial wallet where a third party such as an exchange controls them.
On-chain: Describing transactions or activity recorded directly on a blockchain, as opposed to off-chain activity held only in a provider's internal records.
Paragraph 20 (base cost): The Eighth Schedule provision defining "base cost" — the expenditure you may deduct from proceeds when calculating a capital gain.
Paragraph 35 (proceeds): The Eighth Schedule provision defining "proceeds" on disposal — the amount received or accrued, which is reduced by base cost to find the gain.
Perpetuals (perps): Futures-like contracts with no expiry that track an asset's price using a funding rate; trading gains are generally revenue.
Private key: The secret cryptographic key that authorises spending from a crypto address; anyone with it controls the funds.
Proceeds: The amount received on disposal of a crypto asset, measured in rands at the time of disposal, from which base cost is deducted to find the gain.
Provisional tax: A SARS system of paying tax in advance during the year, which can apply if you earn significant crypto income not subject to PAYE.
Realised gain: The gain that becomes taxable when you actually dispose of a crypto asset, as opposed to a paper gain on assets you still hold.
Reconciliation: Checking that your recorded holdings and transactions match actual on-chain and exchange balances, so tax figures are complete and accurate.
Restaking: Reusing already-staked assets to secure additional protocols for extra rewards, adding further income and tracking complexity.
Ring-fenced loss: A rule that confines certain losses so they can only offset income or gains of the same kind, rather than reducing your other income.
Royalties (NFT): Ongoing payments a creator receives on secondary NFT sales, generally taxed as revenue income when received.
Same-day rule: A UK rule that matches a disposal first against acquisitions of the same token made on the same day, before other matching rules.
SARB (South African Reserve Bank): South Africa's central bank, responsible for exchange-control policy that affects cross-border crypto and currency flows.
SARS (South African Revenue Service): South Africa's tax authority, which treats crypto assets as assets of an intangible nature for tax and expects them declared on the ITR12.
Satoshi: The smallest unit of Bitcoin, equal to one hundred-millionth of a BTC (0.00000001 BTC).
Section 104 pool: HMRC's rule for the UK: identical tokens are grouped into a single pool with an averaged allowable cost used on disposal.
Section 24I: The Income Tax Act provision on exchange differences and certain financial instruments, which can require mark-to-market treatment for some holders.
Seed phrase: A list of words that backs up a wallet and can regenerate its private keys; it must be kept secret and offline.
Specific identification: Choosing exactly which acquired units (lots) are disposed of, rather than applying an automatic rule like FIFO, to set the base cost.
Stablecoin: A crypto asset designed to hold a steady value, usually pegged to a fiat currency like the US dollar — but still treated as crypto for tax.
Staking: Locking crypto to help secure a proof-of-stake network in exchange for rewards, which are generally taxed as income on receipt.
Tax residency: Your status as a tax resident, which in South Africa means worldwide crypto gains are taxable; ceasing residency triggers a deemed disposal.
Taxable event: Any transaction or occurrence that creates a tax consequence — for crypto, typically a disposal or the receipt of income such as a reward.
Transfer: Moving crypto between addresses or wallets you control — generally not a disposal, though transfer fees can affect your base cost.
Understatement penalty: A SARS penalty, from 0% to 200% of the tax shortfall, charged when income or gains — including crypto — are understated.
Unrealised gain: An increase in the value of crypto you still hold, which is generally not taxed until you dispose of the asset.
Validator: A participant in a proof-of-stake network that proposes and confirms blocks, earning rewards that are typically taxable as income on receipt.
Wallet: Software or hardware that stores the keys used to control crypto. Hot wallets are online; cold wallets are offline; custodial wallets are held by a third party.
Wash sale: Selling an asset at a loss and quickly repurchasing it; some jurisdictions disallow the loss, though rules for crypto vary widely.
Weighted average cost: A cost method that pools identical units and uses their average base cost per unit when calculating a gain on disposal.
Wrapped token: A token that represents another asset on a different chain (e.g. WBTC for BTC); wrapping may be treated as a disposal depending on the facts.
Yield farming: Moving crypto between DeFi protocols to maximise returns; rewards are generally income and the moves can trigger disposals.