The South Africa Revenue Service (SARS) is looking into ways to identify the cryptocurrency traders in the country who are not paying taxes on their crypto gains.
“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,” acting SARS commissioner Mark Kingon said, quoted by the South African business news website Fin24.
In his words, once the suspected tax dodger is identified, SARS could launch an investigation and it would be a fairly straightforward affair with those traders who use credit cards. However, Kingon also said SARS had ways of identifying traders, but tracking the ones who have foreign bank accounts and are transacting with foreign jurisdiction might be more difficult to investigate.
As per South African law, the onus is on the taxpayer to declare all cryptocurrency taxable income. If they do not do so, they may face penalties and having to pay interest on the due taxes.
Kingon clarified that cryptocurrencies in South Africa are neither legal tender, nor are they widely used for payments, hence they are not considered currencies and cannot be declared for income tax purposes or capital gains tax. Instead, SARS regards cryptocurrencies as assets of an intangible nature.
Earlier this month, Cryptovest reported that SARS has put forward a proposal on the taxation of cryptocurrency gains. Under it, the tax authority would continue to consider cryptocurrencies as intangible assets, still subject to income tax. If the draft is approved, South African crypto traders would be obliged by law to declare profits or losses they incur from crypto trading as part of their taxable income.