Regulation
Tax crackdown looms for crypto traders in South Africa, experts say – BitKE
The South African Revenue Service (SARS) is targeting cryptocurrency traders for possible non-compliance, according to local tax experts.
Tax professionals at Tax Consulting SA stressed that taxpayers must recognize that cryptocurrency-related activities, even if carried out on the platform and do not necessarily result in gains in fiat currency, are subject to rigorous reporting obligations . This includes reporting and paying taxes due on benefits derived from these activities.
“SARS and the South African Reserve Bank (SARB), through existing working groups and international information exchange, have reiterated their already strong stance towards eradicating non-compliance. This includes special attention to the taxation of crypto assets and rectifying historical issues of non-reporting of crypto-related profits or gains by taxpayers, although without providing firm guidance to the average taxpayer,” they said. declared.
Addressing the perception that crypto assets are not subject to SARS taxes, experts clarified that under the South African Tax Act, crypto assets are classified as financial instruments in accordance with the provisions of the SARS Act. income tax.
“This means that any profits arising from trading crypto assets may fall within the tax scope and be subject to disclosure and possible liability to SARS. As simple as this sounds in theory, the reality is unfortunately more complicated. Cryptocurrency transactions are subject to a range of tax regulations, including capital gains tax, income tax and even VAT in some cases,” they said.
A common misconception within the crypto community is that a “taxable event” only occurs when a crypto asset (CA) is disposed of, resulting in the realization of a profit or gain in fiat currency. However, any sale, exchange (CA for CA) or transfer of crypto assets is likely to be considered a taxable event.
The critical factor determining the tax payable is whether the transferred crypto asset is classified as a capital asset or a trading action. If taxpayers can demonstrate correct capital intention and objective external factors, they will be subject to capital gains tax (CGT) only.
“As with the sale of a house, CGT liability arises if the profits from the sale of crypto assets exceed the initial cost and are at a lower tax rate than if the sale proceeds were treated as a normal income,” the experts said.
If SARS considers profits from crypto transactions to be income, they will be taxed at the marginal rates applicable to individuals, which can be up to 45%, or to businesses, at 27%. This is particularly relevant for frequent traders, as their crypto activities could push them into higher tax brackets.
Following significant crypto returns, it might be tempting to “cash in” and spend the profits on luxury items. However, it is important to remember that SARS is escalating its crackdown on crypto tax compliance and demanding its share.
Individuals who hold or have previously held cryptocurrencies should not assume that past failure to file will protect them from future tax liabilities. SARS has made it clear that it will spare no effort in its mission to collect revenue by any means necessary.
Furthermore, it is false to believe that SARS cannot be investigated beyond five years. SARS has every right to review all historical transactions if a taxpayer has failed to disclose material facts, committed fraud or made misrepresentations.
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