How Polymarket Works - What SARS Sees on the Blockchain
Polymarket is an on-chain prediction market platform where you buy and sell outcome shares using USDC. When a market settles, shares on the winning side are redeemed at $1 each. Shares on the losing side expire worthless. These events can create taxable gains or losses that SARS expects to see reported in your annual return.
SARS has issued Interpretation Note 99 on the taxation of cryptocurrencies, treating them as assets subject to either revenue or capital treatment depending on the taxpayer's circumstances. No specific guidance exists for prediction markets. USDC is likely treated as a crypto asset under the same framework. South Africa's tax year runs March 1 to February 28 (or 29 in leap years).
How South Africa Likely Taxes Polymarket Profits
SARS distinguishes between revenue (ordinary income) and capital (capital gains) treatment for all investments, including crypto and prediction market contracts. The distinction depends on the nature, intent, and frequency of the activity - and the facts and circumstances of each taxpayer.
Revenue treatment (frequent or systematic trading): If your Polymarket activity is frequent, systematic, and primarily profit-motivated, SARS is more likely to treat gains as gross income under Section 1 of the Income Tax Act. Revenue gains are taxed at marginal rates, up to 45% for individuals. Losses are deductible against other income.
Capital treatment (occasional or speculative activity): If your activity is occasional and speculative rather than a business-like operation, it may be treated as a capital gain. Only 40% of the net capital gain is included in taxable income (the inclusion rate for individuals). The annual exclusion is R40,000 for the year ending 28 February 2026 and R50,000 for the year ending 28 February 2027; it reduces the gain before the inclusion rate applies.
No specific SARS guidance on prediction markets exists. The treatment depends on the facts and circumstances of your trading activity.
The USDC Layer - Separate Crypto Disposals
SARS treats cryptocurrency as an asset. When you dispose of USDC (convert to ZAR or another currency), you trigger a taxable event. The revenue vs capital distinction applies to USDC disposals as well as to Polymarket positions.
- Buying USDC: acquisition at cost basis in ZAR at time of purchase
- Depositing USDC to Polymarket: wallet transfer only, not a disposal
- Withdrawing USDC from Polymarket: wallet transfer only, not a disposal
- Converting USDC to ZAR: disposal event - revenue or capital depending on treatment
- Selected-year annual exclusion: R40,000 for the year ending 28 February 2026; R50,000 for the year ending 28 February 2027; capital disposals only
- Section 9C election: this provision applies to equity shares held for more than 3 years and is unlikely to apply to USDC
What DYOR.tax Calculates for South African Filers
The calculator scans your Polymarket proxy wallet to identify every trade, redemption, and settlement. For South African traders it applies FIFO cost basis, tracks the March-February tax year, and produces output organized for ITR12 review.
- Proxy wallet scan for all trades and settlements
- Revenue vs capital flag based on trading frequency and pattern
- Capital-gains scenarios with the 40% inclusion rate and selected-year annual exclusion
- USDC disposals tracked with the March 1 to February 28 SA tax year
- Market-by-market P&L organized for SARS review
- Optional History CSV enrichment for deposits and withdrawals
South African Filing Requirements for Polymarket
South African residents report Polymarket gains in their annual ITR12 return. The section used depends on whether the activity is treated as revenue or capital.
- Revenue gains: include in gross income in your ITR12
- Capital gains: complete the Capital Gains section of your ITR12 (Schedule to the Return of Income)
- USDC capital gains: also in the Capital Gains section of the ITR12
- Tax year: March 1 to February 28 (February 29 in leap years)
- Deadline: November 23 for eFiling, October 24 for branch filing, for the 2025 tax year
- Records: keep transaction records for 5 years after the relevant assessment year
Common Polymarket Tax Mistakes in South Africa
- Applying only capital treatment when revenue applies: if your trading is frequent and systematic, SARS is likely to treat gains as revenue taxable at marginal rates, not the lower effective CGT rate.
- Using the wrong annual exclusion: R40,000 applies to the year ending 28 February 2026 and R50,000 to the year ending 28 February 2027, for qualifying capital gains only.
- Ignoring USDC disposal events: converting USDC to ZAR is a disposal that may create a taxable gain or loss.
- Not accounting for the March-February tax year: South Africa's tax year differs from the calendar year. Positions settled between March 1 and February 28 belong to that tax year.
- Using the wrong inclusion rate: the CGT inclusion rate for individuals is 40%, not 100%. Only 40% of the net capital gain remaining after the applicable exclusion is added to taxable income.
Related Resources
For broader South African crypto tax context, the South Africa crypto tax calculator covers the revenue vs. capital distinction, the 40% inclusion rate, and year-specific exclusions. The Polymarket and Kalshi tax guide covers the facts-based classification analysis, and the South Africa crypto tax deadline page has key SARS filing dates.
For Polymarket traders in other countries: USA - UK - Canada - Australia - New Zealand - India
Back to the Polymarket tax calculator main page.