To explicitly target cryptocurrency trading and investment both domestically and internationally, the South African Revenue Service (SARS) has set up a dedicated cryptocurrency unit.
The unit’s scope is essentially limitless, and SARS has verified that it can obtain information straight from regional crypto-asset exchanges to make non-compliance difficult and expensive for taxpayers.
The range of SARS’ non-compliance radar is greatly expanded by international collaboration and automated information sharing.
SARS’ jurisdiction over a taxpayer’s legal duty to account for any income or assets is a worldwide phenomenon, regardless of whether your cryptocurrency assets are held and disposed of locally or offshore.
The SARS crypto team is made up of highly skilled individuals with specialised knowledge. The unit has the authority to detect non-compliance at all levels, do thorough audits, and open historical tax periods. This covers everything from a routine check to situations where taxpayers have actually lost money on their cryptocurrency activities to severe situations where SARS reclassifies proceeds from cryptocurrency sales from capital gains to income. This recategorisation powers can have a startling effect on a tax bill.
Depending on the marginal tax rate of each individual taxpayer, this procedure may raise the tax rate from the current 18% capital gains tax rate for people to as high as 45%.
Given the unit’s broad authority, individuals who currently own or have previously owned cryptocurrency should not presume that SARS will not attempt to tax these gains in the future due to past non-declaration. Additionally, since SARS is already aware, cryptocurrency traders shouldn’t presume that notices asking for information are for data collection.
Although taxpayers are asked to fully disclose all local and international cryptocurrency transactions to SARS, this is primarily done for verification rather than data collection.
Recent court cases have shown that the taxman is fully empowered and capable of taking money directly from bank accounts if a tax debt is owed.
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Kindly note this article is intended for general information purposes only and does not constitute accounting, tax, nor regulatory related advice. Should you need advice, please contact one of our practitioners.