In recent years, South Africans who have bought cryptocurrencies are being audited by the South African Revenue Service (SARS), which has sent them letters requiring more information about these investments.
Though there is no clear legislation on the purchase and sales of cryptocurrencies, SARS has made it clear that this does not mean that any person trading in cryptocurrencies will escape taxation.
Gugulethu spoke to Thomas Lobban, the Manager of Cross-Border Taxation at Tax Consulting SA, to better understand South Africa in the crypto space.
Listen to the full conversation here:
Cryptocurrency is Taxable
Lobban says that cryptocurrency has always been taxable and that it’s not only when you withdraw it from whatever platform or when you sell it for money. It is normally subject to capital gains tax. “The fact of the matter is that cryptocurrency has always been taxable, it’s only recently that SARS has picked up this project and closed the gap in revenue collection.
Audit Letters sent by SARS
SARS is currently requesting information from taxpayers directly.
Those who have received these letters have been asked to explain their cryptocurrency investments, and provide letters from trading platforms confirming the investments.
Lobban added that this is important to share as there is dishonesty or non-compliance that could result in penalties and possible imprisonment of up to 5 years.
“There are different kinds of tax offences, certain offence will lend you a fine or imprisonment for up to 2 years, but where you are seen to be evading tax to claiming an undue refund, which in this case is when you leave cryptocurrency income off your tax returns for an example.”
The taxpayer must prove the tax position they’ve taken when it comes to cryptocurrency, throughby showing reports from the cryptocurrency platform they are using.