Stricter cryptocurrency taxes are on the way in South Africa – BusinessTech

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

Over the last five years, South Africa has emerged as one of the worlds most notable cryptocurrency adopters, and an estimated 13% of its internet users owning or using cryptocurrencies.

With the South African Bitcoin/ZAR weekly trading volume to name just one currently standing close to R30 million, there are various manners in which 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, who says that there are various techniques SARS could apply for the direct taxing of cryptocurrencies.

To start, the fact that cryptocurrencies were created to allow for anonymous, frictionless and trusted peer-to-peer transaction to be conducted over the internet (including cross-border transactions) means that it can be used as a means of tax avoidance in a number of different ways.

As Olivier explains, investors can store their cryptocurrencies in paper or hardware wallets instead of relying on a custodian such as an exchange to safeguard their assets, which 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 to attempt to confuse the trading activities and to evade taxes.

He noted that SARS is currently relying on the honesty of South African taxpayers to include their realised gains on cryptocurrencies as part of their taxable income.

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.

One of these interventions may include introducing regulations that require all South African cryptocurrency exchanges to share information with SARS, making it more difficult to apply the above-mentioned method of avoidance.

With that said, it will require SARS to gear itself to ensure that it can collect on what it is owed, said Olivier.

There is also the possibility that offshore cryptocurrency exchanges and banks might have the same agreement with SARS as foreign institutional investors have, whereby they 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.

Notably, Olivier is of the opinion that businesses should already begin to prepare for tighter regulation of their digital assets. 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.

With the introduction of stricter tax legislation a virtual certainty within the next few years, Olivier adds that preparing for these interventions well ahead of time may be beneficial for cryptocurrency exchanges, traders and investors.

The regulation of digital assets in South Africa could even bring exciting business opportunities for many entrepreneurs and business, Olivier said.

Read: Major trading scheme under investigation in South Africa

More here:
Stricter cryptocurrency taxes are on the way in South Africa - BusinessTech