South African Revenue Services warns Crypto trading community of potential incoming tax regulations on digital assets.

Written by jamie

September 1, 2020

A couple of weeks ago The Crypto university blog launched an article that talked about the details of the Kenyan government taking steps towards implementing strict rules surrounding digital asset holders tax paying regulations as a panic result of the crypto currency peer to peer market in Kenya having skyrocketed and establishing themselves in Kenya and making them the first African fiat currency available on their platform.

We went on to speculate that other African governments and revenue organisations might be looking to explore similar options to that of the Kenyan government. We went further to say that it is only a matter of time until SARS and the South African government do the same, and rightfully so it has just been reported that strict tax paying regulation for digital asset holders in South Africa are indeed incoming. READ THE REFERENCED ARTICLE HERE.

Accounting and consulting group Mazars, says that cryptocurrency traders should prepare for stricter taxes in South Africa in the near future.

 South Africa has become a nation where the adoption of crypto currencies kept growing significantly over the last half of this decade and has an estimated 13% of its internet users owning or using cryptocurrencies.

The weekly trading volume of crypto currencies in south Africa currently stands at a whopping R30million, and SARS is starting to feel a little too out of control due to people being able to avoid large sums of taxes, hence why they are looking for ways to penetrate by adding stricter tax regulation of digital assets.

 Wiehann Olivier, is a partner at the audit division of Mazars in South Africa, he states that SARS is currently looking for efficient ways in which they can implement new tax rules.

He says that SARS feels as though the nature of crypto currencies and how they are meant to function is a direct threat to revenue service organizations, because of how easy and simple it is to securely perform anonymous based peer to peer transactions locally and overseas. This gives people opportunity of tax avoidance, and at the moment SARS don’t have a legitimate way to control what happens on these exchanges, and therefore they have to lay their trust in tax payers to include their crypto Income on their books.

Olivier says that the other concern that SARS have is that investors can store their coins in writing or hardware wallet devices rather than relying on a custodian exchange to hold their keys and keep their assets safe, which makes it impossible to confiscate these cryptocurrencies and extremely difficult to track their movements.

He also states and I quote “There is also the option to rely on a series of smoke and mirrors. Different types of cryptocurrencies can be exchanged for one another and passed through a series of wallets and public key addresses to attempt to confuse the trading activities and to evade taxes.”

“SARS has not yet released any specific legislation around the taxation of cryptocurrencies, besides that taxpayers need to include any realised gains from the trading of crypto currencies in their taxable income. However, we believe that SARS will publish new regulations in the coming years to have a more specific focus on these digital assets.”

These interventions may refer to the introduction of regulations that make it compulsory for exchanges that operate in South Africa to share information such as KYC and volumes on their customers accounts with SARS. Which will make it much harder for people to avoid taxes.

SARS also looking at the possibility of striking a similar agreement with offshore financial services to really box in south African digital asset investors.

Olivier believes that rather than neglecting it and waiting to see what happens, businesses and individuals should start preparing for this finally happens because he believes it will really happen, and so preparing for these interventions well ahead of time may be beneficial for cryptocurrency exchanges, traders and investors.. He said “Trading companies should consider acquiring the services of firms that can supply confirmation and reporting around its clients’ digital currency audits, well before new regulations are introduced.”

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