South Africa Revenue Service (SARS) commissioner Mark Kingon has said that the government department is investigating alternative methods to find and identify cryptocurrency investors who may be avoiding taxes.
Tax must be paid on crypto gains
Speaking at the Institute of Internal Auditors SA conference in Sandton late last week, Kingon reaffirmed the requirement for investors to pay taxes on cryptocurrency profits. He noted, however, that the department is facing difficulties when it comes to clearly identify each individual making trades due to the anonymous nature of exchanging cryptocurrencies on blockchain-based platforms.
While Kingon said that SARS do have particular ways of finding and identifying traders, there are no clear-cut ways of dealing with problems such as citizens using foreign bank accounts, as transactions may technically be taking place in foreign jurisdictions.
It is crucial to be able to identify each individual linked with transactions or wallets because not everybody trading is making a profit, he said, adding that this is the only portion required to be deducted. Normal income tax rules have recently been applied to cryptocurrencies in South Africa, with taxpayers expected to declare profits and losses with their annual tax bills.
The onus to declare cryptocurrency-related taxable income is held on the citizen at the end of the tax year, with failure to relay this leaving them subject to interest and penalties.
Non-compliant traders would be able to lodge queries with the SARS for further investigation.
”Assets of an intangible nature”
Cryptocurrency is not accepted as legal tender in South Africa, rather they are regarded as “assets of an intangible nature”. This means that they do not constitute as cash but rather, are valued by SARS as the amount of money they were purchased for and have accrued. They fall under the SARS definition of gross income.
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