Cryptocurrency has heralded a new dawn of investment, and regulators worldwide have been sluggish to respond. However, it is now firmly on the tax radar for revenue authorities globally; and the South African Revenue Service (SARS) position seems to be no different.
Many South Africans have made investments in cryptocurrency, and we see all types of traders and investors daily.
The walls are closing in on crypto-traders
In the 2021 Budget Speech, Minister Tito Mboweni announced that SARS would be provided with an additional allocation of R3 billion to “modernise its technology infrastructure and systems, expand and improve the use of data analytics and artificial intelligence capabilities, and participate meaningfully in global tax compliance initiatives”.
Also, audit letters have been recently sent to taxpayers inquiring about their cryptocurrency-related holdings and activities. And following the 2021 Budget Speech, the Commissioner of SARS, Edward Kieswetter, stated, “[u]ndisclosed offshore assets, including crypto-assets such as bitcoin, will be a big area of focus”.
SARS seems to be looking at cryptocurrency as an area of additional tax revenue. With the ability to raise 100% penalties and the strengthening of criminal offences provisions, where an innocent mistake can now give you a criminal record, the law is very much in SARS’ corner. Now, the infrastructure is already being put in place to ensure that the shortfalls of SARS’ current information-gathering and tax revenue collection mechanisms are systematically closed.
SARS has already included cryptocurrency questions in the capital gains tax portion of tax returns and has further created source codes for cryptocurrency-trading profits (2572) and losses (2573), respectively. This means that there is no room for a taxpayer to manoeuvre in light of non-disclosure in their returns.
United States example – are they smarter?
The much-feared United States Internal Revenue Service (IRS) has…
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Read the full article by Thomas Lobban, Legal Manager Cross-Border Taxation, Tax Consulting South Africa, as well as a host of other topical management articles written by professionals, consultants and academics in the April/May 2021 edition of BusinessBrief.
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