According to a report, the South African Revenue Service (SARS) has sent tax requests to taxpayers asking them to disclose their cryptocurrency trades and purchases. Taxpayers who fail to correctly disclose their income from Bitcoin or other cryptocurrencies can be “punished with a fine or a prison sentence of up to two years”.
SARS Tracking Non Compliant Taxpayers
In the report, which is based on statements from Tax Consulting South Africa, cryptocurrency traders must now state the purpose for the purchase of the digital assets. In addition, crypto traders are required to submit a “letter from the trading platform (s) confirming the investments and the relevant trading plans for the period and the bank statements.”
However, as Tax Consulting South Africa notes, this changed approach by SARS could create problems for taxpayers. According to the tax advisory firm, “It is no longer important whether the taxpayer in question had a justification for such confidentiality or a false statement.” Furthermore, this change in the audit requirements process means that SARS is actively taking action against non-compliant cryptocurrency traders in South Africa.
“It is understandable that SARS is in the process of seducing culpable taxpayers who have failed to disclose their cryptocurrency-related trading profits and / or losses,” says Tax Consulting South Africa.
The organization suspects that the exam requests are the “main weapon in the SARS arsenal and the walls are getting closer to non-compliant cryptocurrency traders”.
New paradigm needed
In response to SARS “paying due attention to cryptocurrencies,” said Ben Zhou, CEO of Bybit, a leading exchange for crypto derivatives, this approach “leaves much to be desired.” Zhou explains:
The decentralized nature of cryptocurrencies represents the future of money and requires a paradigm shift from current thinking. Proposals for a crypto regulatory framework should incorporate regulatory technology (Regtech) and crypto-native solutions such as smart contracts, rather than the old standard that indicates its age in the age of digital payments and central bank digital currencies (CBDC).
Meanwhile, Tax Consulting South Africa is calling on the country’s crypto traders who may not have disclosed their purchases for advice. The organization adds, “Even if you have not purchased cryptocurrency in the past, you should exercise caution when responding to a monitoring request.”
What do you think of SARS ‘new approach to taxing cryptocurrencies? Let us know what you think in the comment section.
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