In a recent report, the South African Tax Authority – SARS(South African Revenue Service) is aiming to bring down non-compliant crypto traders with the respect to non-declaration of profits earned through their investments. The news came into light during a speech given by acting Commissioner Mark Kingon in a conference at the Institute of Internal Auditors SA, Johannesburg.
As published on fin24, Kingon explains the intention behind this agenda,
“The key thing is identifying people who are trading because it’s easy to say cryptocurrency gains must be deductible, but there are also those who lose. That’s why it’s important to identify the trader.”
Quoting the statistics, he went on to say that most traders make use of credit cards. This will help to easily identify non-compliant traders and hence lodge the complaint with SARS.
But surely this is not an efficient way of hunting down such traders as it is not cost effective process and moreover traders manage to make transactions outside the country using foreign banks.
In this regard, Kingon stated that,
“[I]n terms of the broader reporting, the common reporting standards, country by country, (ensures) the world is getting smaller and we are getting far more people transacting in foreign jurisdiction,”
Nevertheless, SARS is planning to enter into validating international transactions as well and with the same optimistic attitude quoted that,
“I think it is a matter of time, but it will enable us to do better”
Furthermore, SARS clearly states that it is the responsibility of taxpayers to dutifully declare all crypto related taxable income failing which will be subjected to pay respective penalties ineffective from April this year.
Astonishingly, there is no clause or statement mentioning the usage of cryptocurrency and also highlights that,
“n South Africa, the word ‘currency’ is not defined in the Income Tax Act. Cryptocurrencies are neither official South African tender nor widely used and accepted in South Africa as a medium of payment or exchange. As such, cryptocurrencies are not regarded by SARS as a currency for income tax purposes or capital gains tax”
Indeed SARS says cryptocurrencies are intangible in nature and elaborates as below.
“cryptocurrencies are regarded by SARS as assets of an intangible nature. While not constituting cash, cryptocurrencies can be valued to ascertain an amount received or accrued as envisaged in the definition of ‘gross income’ in the act”