South African taxman is cracking down on crypto traders: report

Experts at Tax Consulting South Africa have highlighted that the South Africa Revenue Service (SARS) is focusing on cryptocurrency traders to detect potential non-compliance issues. 

They stress the need for taxpayers to understand the reporting requirements for crypto-related activities and the importance of paying taxes.  

Dive in 

• In a BusinessTech report, the experts addressed a common misconception amongst taxpayers that crypto profits or gains fall outside the South African tax net. 
• The SARS and South African Reserve Bank (SARB) have repeatedly debunked the misconception that crypto profits are not subject to South African taxes. They emphasize that profits from cryptocurrencies are taxable in South Africa. 

Key quote  

• According to the experts:

“SARS and the South African Reserve Bank (SARB), through existing working groups and international information exchanges, have reiterated their already strong stance on eradicating non-compliance.

“This includes a keen focus on crypto asset taxation and rectifying historic taxpayer issues of non-declaration of crypto-related profits or gains, albeit without providing firm guidance to the average taxpayer.”  

Know more 

• In South African tax law, crypto assets are viewed as financial instruments under the Income Tax Act, which means profits from dealing in them may be taxable. 
• In addition, cryptocurrency transactions are subject to various tax regulations such as capital gains tax, income tax, and sometimes value-added tax (VAT). 

Of note 

Traders should note the following obligations by SARS: 

• Any sale, exchange, or disposal of crypto assets is considered a taxable event. 
• The tax liability depends on whether the crypto asset is viewed as a capital asset or trading stock. 
• Capital gains tax applies if the correct capital intent is demonstrated. 
• Profits from crypto dealings can be taxed at marginal rates up to 45% for individuals and 27% for companies 

Key context  

• The characteristics of crypto assets, allowing transactions without traditional financial intermediaries, posed challenges for tax authorities in accurately monitoring tax activities. 
• Last November, South Africa joined about 50 other countries in adopting the Crypto Asset Reporting Framework (CARF) proposal developed by the Organization for Economic Co-operation and Development (OECD) to regulate how cryptocurrency transactions are reported. 
• The CARF framework is expected to be implemented by 2027 subject to national legislative processes.