Crypto Traders, Beware: Sars is Coming for You
The cat is out of the bag, and South African crypto traders are panicking. The South African Revenue Service (Sars) has started sending out notices to crypto traders, demanding information about their crypto assets. And it’s not just a gentle reminder – Sars is asking for historical ownership records, which could lead to a tax liability for those who have been hiding their crypto profits.
Luno’s Christo de Wit: Don’t Fear the Audit
But don’t worry, says Christo de Wit, country manager for Luno, a cryptocurrency exchange based in Cape Town. "An important thing that taxpayers need to consider is that even though you need to report on the profits to see where your tax liability lies, you can also report on the losses," he says. "Cryptocurrency is at an all-time high this year, but we saw about a year-and-a-half ago that bitcoin dropped to around US$17 000 and a lot of people incurred losses in that period. That can also be reported to Sars and you can reduce your tax liability in that sense."
VALR’s Farzam Eshsani: Transparency is Key
Farzam Eshsani, CEO of VALR, another cryptocurrency exchange, agrees. "VALR prides itself in safeguarding customer assets and information and does not share any customer information with any authority unless required to do so by law. All legitimate crypto asset service providers in South Africa, such as VALR, are accountable institutions, must be licensed with the FSCA (Financial Sector Conduct Authority) and must abide by the laws of the land," he says.
The Taxman Cometh
But don’t think you can hide from Sars. "Crypto assets may be subject to capital gains tax or income tax depending on whether they are used to generate revenue via trading or held for longer periods as an investment," says De Wit. And if you’re caught hiding your crypto profits, you could face serious consequences.
Sars Needs to Spell Out the Rules
De Wit warns that Sars needs to provide clearer guidelines on what constitutes a taxable event. "In the general public, there is still lack of clarity in terms of what a taxable event is. When you buy cryptocurrency today and the market goes up in two weeks’ time and profits are made, is that seen as a taxable event or is it only when you extract that? I think Sars still needs to provide clarity on that," he says.
The Verdict
So, crypto traders, don’t panic just yet. But do take heed of Sars’ demands for transparency. Remember, it’s not just about hiding your profits – it’s about being honest and paying your taxes.
