DeFi tax basics (lending, LPs, yield)

Why DeFi is harder to tax

Decentralised finance (lending, liquidity pools, yield farming) generates frequent, automated, on-chain events with no statement and often no rand value attached. SARS has not published exhaustive DeFi-specific rules, so you apply first principles: is each event a disposal (CGT/revenue) or a receipt of income? Treatment is evolving, so document and hedge.

Lending

Supplying crypto to a lending protocol and earning interest-like rewards generally produces income at the rand value when rewards accrue. Whether depositing into the protocol is itself a disposal depends on the mechanics: if you receive a different token representing your deposit, that exchange may be a disposal.

Liquidity pools (LPs)

Adding to a liquidity pool often means swapping your tokens for LP tokens, which can be a disposal of the deposited assets. Rewards and fees earned are generally income. Removing liquidity is another potential disposal. The substance of the protocol (what you give and receive) drives the analysis.

Yield farming

Yield rewards are generally income at market value on receipt; the value received becomes the base cost for a later disposal. Frequent reward accruals make automated valuation essential.

Wrapping and bridging

Wrapping a token or bridging across chains may or may not be a disposal depending on whether beneficial ownership and the asset genuinely change. Treat conservatively and document.

The practical reality

DeFi can generate hundreds of taxable legs a year. The risk is not the rate. It is missing or mis-valued events. Reconcile on-chain activity and attach rand values to every leg.

Not tax advice

DeFi treatment is unsettled and fact-specific. Confirm with a registered tax practitioner.