Luno, a cryptocurrency exchange based in Cape Town, has advised crypto-asset traders not to be fearful of an audit by the South African Revenue Service, encouraging them to be transparent with the receiver of revenue.
This follows a report by Moneyweb on Thursday which said that crypto traders have started receiving notices from Sars requesting information about their crypto assets.
According to the report, Sars may request historical ownership records related to prior tax reporting periods, meaning that previously undeclared crypto assets may give rise to a tax liability.
“An important thing that taxpayers need to consider is that even though you need to report on the profits to see where your tax liability lies, you can also report on the losses,” Christo De Wit, South Africa country manager for Luno, told TechCentral in an interview about the new rules.
“Cryptocurrency is at an all-time high this year, but we saw about a year-and-a-half ago that bitcoin dropped to around US$17 000 and a lot of people incurred losses in that period. That can also be reported to Sars and you can reduce your tax liability in that sense.”
De Wit said cryptocurrency exchanges do not, in general, share client data with Sars. However, if Sars asks for specific data in the process of an investigation, then the exchange is obliged to hand that information over. It is the duty of the taxpayer to inform themselves and determine their liability to Sars, even if that means using the services of a tax consultant, he said.
Licensed
Farzam Eshsani, CEO of VALR, echoed De Wits sentiments. “VALR prides itself in safeguarding customer assets and information and does not share any customer information with any authority unless required to do so by law. All legitimate crypto asset service providers in South Africa, such as VALR, are accountable institutions, must be licensed with the FSCA (Financial Sector Conduct Authority) and must abide by the laws of the land,” said Ehsani.
De Wit said despite not being in the tax business, exchanges try to alert their clients about their tax duties and how they are likely to be taxed. Crypto assets may be subject to capital gains tax or income tax depending on whether they are used to generate revenue via trading or held for longer periods as an investment. He warned, however, that Sars needs to spell out some of its definitions to make it easier for traders to determine their tax liabilities.
“In the general public, there is still lack of clarity in terms of what a taxable event is. When you buy cryptocurrency today and the market goes up in two weeks’ time and profits are made, is that seen as a taxable event or is it only when you extract that? I think Sars still needs to provide clarity on that,” said De Wit. – © 2024 NewsCentral Media