
SARS: the one regulatory body that leaves no income-providing stone unturned. Within the next few months, you can expect SARS to start targeting crypto assets and start taking a piece of the pie, i.e. the profits generated from those crypto assets. You will also be obliged to declare these crypto assets during the annual tax return season.
What is a crypto asset?
SARS defines a crypto asset as a digital representation of a value that is not issued by a central bank. Crypto assets can be traded, transferred, and stored electronically by a person or company for the purpose of payment, investments, and other forms of utility. Crypto assets were formerly referred to as cryptocurrencies until recently, to broaden the definition from the realm of currency.
It is no surprise that this digital representation in the form of an asset has drawn global attention. Individuals, companies, and governments are all interested in crypto assets and the returns have been particularly high over the last few years.
Due to the nature of these assets, it was difficult for governments to regulate them, particularly from a tax perspective. It has taken them a few years to get on board but now you can expect SARS to start taxing those returns.
What are SARS plans for crypto assets?
From the inception of crypto assets until early last year, you were not required to declare any crypto assets and/or returns from crypto assets. From SARS perspective, it was essentially an untapped pool of income, hence the reason for their new outlook towards crypto assets.
So, SARS plan new plan is to regulate crypto assets and/or returns from the assets in the same way that every other investment or income is regulated in South Africa which will result in a whole new stream of income into the country without having to increase taxes on the ordinary person.
What happens if you try to hide crypto assets?
In 2021, SARS was allocated a substantial budget by the government to improve their tracking systems and abilities to track any and all undeclared assets and income being held in offshore accounts. This includes crypto assets and income from such assets.
So, while crypto asset platforms are not yet legally required to report on their clients’ assets and income from those assets to SARS, you can expect this to change in the future. SARS has started asking South Africans for information on any and all crypto transactions in audit letters, whether those South Africans have traded in crypto assets or not.
It is a criminal offence to wilfully neglect and/or fail to submit information requested by SARS, or makes a false misrepresentation to SARS, regarding the crypto assets. You could either be subject to a hefty fine or imprisonment for up to two years. Depending on the severity, you could be imprisoned for up to 5 years for tax evasion.
The Crux
Your crypto assets will have to be declared. It is no longer an untaxable source of income. If you fail to declare these assets, you can face criminal liability.
As a first point, always seek professional advice from a tax specialist regarding your crypto assets, and income derived from those assets.
So just to reiterate, it is now your responsibility to declare all the taxable returns and income that derive from crypto assets. If you have received an audit letter from SARS, contact a tax consultant to assist you. Don’t try to sort the issue out by yourself, it could land you in trouble if done incorrectly.
– Rushni Ebrahim