By MyBroadband
The South African Revenue Service (SARS) has asked cryptocurrency exchanges for information on their customers as part of a crackdown on tax evasion by crypto traders.
It followed audit requests from SARS to taxpayers in February, requesting them to disclose cryptocurrency trades and purchases.
Commenting on their crackdown on cryptocurrency traders, SARS commissioner Edward Kieswetter said they had seen a significant increase in buying and trading of cryptocurrencies in South Africa.
“The number of exchanges in South Africa is increasing as well. We have 12 different trading sites, but we focus on the top ones,” he said.
He said SARS would increasingly engage with cryptocurrency exchanges to obtain their information to detect people who buy and trade cryptocurrencies.
Commenting on the tax laws applicable to cryptocurrency trading, Kieswetter said it is no different from any other asset.
There is the acquisition and disposal of assets, whether that asset is a house, a share on the stock exchange, or a cryptocurrency on a crypto exchange.
When you dispose of the asset, there is a capital gain or a capital loss. If there is a gain, capital gains tax applies as it applies to any other asset.
“You are either an acquirer and a holder of an asset, or you acquire assets for trading. In other words, you are buying and selling,” Kieswetter explained.
When you are buying and selling cryptocurrencies, you are in the business of trading. If through the business of trading you earn income, that income is taxable.
“So, if at any point in time you have earned income through trading crypto assets, you should disclose that income as you disclose all your income,” he said.
Kieswetter said you should convert the income from the cryptocurrency value to the rand value for tax filing purposes.
He said there is always a debate whether the activity is a capital gain, income, or revenue, and this is where the rubber hits the road.
“That is where taxpayers may try to mask the true nature of that money – whether it is capital growth, or in fact, income,” he said.
Kieswetter urged South Africans who buy or trade cryptocurrencies to follow the route of voluntary compliance through full disclosure of their activities.
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