According to a report, the South African Revenue Service (SARS) has sent out audit requests to taxpayers asking them to disclose their cryptocurrency trades and purchases. Taxpayers that fail to correctly disclose their income from bitcoin or other cryptocurrencies may be â€œliable to a fine or imprisonment for up to two years.â€
SARS Tracking Non-Compliant Taxpayers
In the report, which is based on statements made by Tax Consulting South Africa, cryptocurrency traders are now required to state the purpose for purchasing the digital assets. In addition, crypto traders must submit a â€œletter from the trading platform(s) confirming the investments and the relevant trading schedules for the period and bank statements.â€
However, as Tax Consulting South Africa observes, this changed approach by SARS could spell trouble for taxpayers. According to the tax consulting firm, â€œit is no longer material whether the taxpayer concerned had justification for such non-disclosure or false statement made.â€ Further, this change to the audit request process means â€œSARS is actively cracking down on non-compliant cryptocurrency traders in South Africa.â€
â€œIt is feasible to understand that SARS is in the process of ensnaring culpable taxpayers who have not disclosed their cryptocurrency-related trading profits and/or losses,â€ says Tax Consulting South Africa.
The organisation surmises that the audit requests are the â€œprimary weapon in SARSâ€™ arsenal and the walls are closing in on non-compliant cryptocurrency traders.â€
New Paradigm Needed
Meanwhile, in his reaction to SARS â€œgiving cryptocurrencies their due attentionâ€, Ben Zhou, the CEO of Bybit, a leading crypto derivatives exchange, says this approach â€œleaves something to be desired.â€ Zhou explains:
In the meantime, Tax Consulting South Africa is urging the countryâ€™s crypto traders who may not have disclosed their purchases to seek guidance. The organisation adds that â€œeven if you have not purchased cryptocurrency in the past, you should proceed with caution when responding to an audit request.â€
What do you think of SARSâ€™ new cryptocurrency taxation approach? Tell us what you think in the comments section.