Thursday, July 29, 2021

Cryptocurrencies Taxes to be Stricter in South Africa

Cryptocurrencies Taxes to be Stricter in South Africa

According to Mazars an accounting and consultancy group, traders of cryptocurrencies in South Africa would see stricter tax policies soon.

In the last five years, South Africa has emerged as one of the world’s most notable cryptocurrency adopters. Furthermore, an estimated 13% of South Africa’s internet users own or are using cryptocurrencies.

The current South African Bitcoin/ZAR weekly trading volume the South African Revenue Service (SARS) can track the gains made by South African taxpayers who trade cryptocurrencies.

This is according to Wiehann Olivier partner at the audit division of Mazars in South Africa. He explains that the fact that cryptocurrencies were created to allow for anonymous and trusted peer-to-peer transaction means that it can be used to avoid tax in several different ways.

Furthermore, Olivier explains that investors can store their cryptocurrencies in paper or hardware wallets instead of relying on a custodian. This makes it impossible to confiscate these cryptocurrencies and extremely difficult to track their movements.

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. Trading crypto this way gives an attempt to confuse the trading activities and to evade taxes.

Oliver notes that SARS relies on taxpayers honesty to include their crypto gains as part of their taxable income.

Currently, SARS has not yet released any specific legislation around the taxation of cryptocurrencies. Asides from mandating taxpayers to include any realised gains from the trading of crypto currencies in their taxable income. Mazars however believes that SARS will publish new regulations in the coming years to have specific focus on digital assets.

Predicted Regulations on Cryptocurrencies

A predicted intervention will be introducing regulations that require South African cryptocurrency exchanges to share information with SARS. This will make it more difficult to apply the several method of avoidance.

There is also the possibility that offshore cryptocurrency exchanges and banks might have the same agreement with SARS as foreign institutional investors have. This agreement means they will share individuals and companies’ trading and asset holding data with revenue services from various countries. This would again make it more difficult to avoid paying tax by moving assets out of South Africa.

Olivier advises that businesses should begin to prepare for tighter regulation of their digital assets. Preparing for these interventions well ahead of time may be beneficial for cryptocurrency exchanges, traders, and investors.

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