The South Africa Revenue Service (SARS) is expected to increasingly target crypto assets, and taxpayers will need to take the extra steps to ensure they are compliant, according to Businesstech.
While investment in and exchange of crypto assets is not illegal in South Africa, there are steps required to remain compliant, more so within the purview of regulatory oversight. This includes having an understanding of the parameters of what is, and is not, permitted in each case, says Thomas Lobban, legal manager at Tax Consulting SA.
Crypto assets are defined as financial instruments in the Income Tax Act and are treated as assets, similar to a share or a loan, for example.
‘Unless taxpayers are given the tools and incentives to facilitate the correct disclosure and assessment of crypto asset transactions for tax purposes, we will likely continue seeing taxpayers and SARS grapple with compliance. We have already seen SARS enforcing tax compliance, with penalties of up to 100% raised following an audit.
‘The private crypto-asset sector will also need to adapt to the increased compliance burden in order to effectively operate within the South African market. For example, we may soon see the introduction of certificates issued by crypto asset service providers for tax or other regulatory compliance purposes.’
There is no legitimate way for crypto asset investors to remain “invisible” from SARS.
‘Even where you fail to disclose correctly now, the non-disclosure is permanent and will come back in a few years to catch-up with the taxpayer.
‘SARS has appointed specialists to deal with crypto assets, yet the market has not seen any prosecutions in this area of tax.’
Crypto-asset holdings (not just gains and losses) must now be declared in tax returns.