Latest reports from South Africa suggest that the country’s tax agency will now be targeting cryptocurrency investors as it attempts to increase the total value of revenues collected. Alongside high net worth individuals and offshore investors, digital currency holders now constitute an area that is “likely to yield much of the extra tax” for the revenue collector.
Crypto Investors Unaware of Tax Liabilities
However, according to a report, many South African cryptocurrency holders are “oblivious of the fact that trading in cryptocurrency renders them liable for tax.” The report, which relies on the expert opinion of Thomas Lobban, says the “South African Revenue Service (SARS) (currently) has cryptocurrency trading very much in its sights.”
Further, Lobban who is the legal manager at Tax Consulting South Africa said:
As with any other asset class, investors must understand their tax obligations in relation to their crypto investments, and plan accordingly. If they do not, then chances are they could find themselves facing an unwelcome tax bill down the line.
Different Crypto Trades
Meanwhile, the report also quotes Lobban explaining how the different types of crypto trades can have a bearing on the kind of tax that will be paid. For instance, Lobban asserts that “crypto transactions could be deemed to be capital in nature and thus liable only for capital gains tax.”
On the other hand, some transactions “could be deemed to be revenue-earning in nature, and would thus be taxed according to the taxpayer’s normal tax rate as per the tax tables.” The tax consultant also points out that when “a trade is made between, say, bitcoin and ethereum, the notional profits of that transaction would also be taxable.” This position is in contrast to the prevailing belief that a “tax event” only occurs when the cryptocurrency is withdrawn and converted into legal tender.
In the meantime, Lobban reveals that SARS is already requesting information on crypto transactions on audit letters issued to taxpayers. In addition, the revenue collector is reportedly “investing heavily in its IT capabilities.” The report adds that such capabilities will enable SARS “to analyse financial and transaction data more effectively, and identify transactions in and out of crypto platforms.”
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