South Africa-Taxpayers told to disclose Income from Crypto Trading or Face Possible Jail Time

According to a report, the South African Revenue Authority (SARS) has sent out audit requests to taxpayers asking them to disclose their cryptocurrency trades and purchases. The authority warned that taxpayers that fail to declare their income from Bitcoin or other cryptocurrencies correctly might be “liable to a fine or imprisonment for up to two years.”

In the report, which is based on Tax Consulting South Africa’s statement, cryptocurrency traders are now required to state the purpose for purchasing the digital assets. Besides, crypto traders must submit a letter from the trading platforms confirming the investment and the relevant trading schedules for the period and bank statements. However, as Tax Consulting South Africa observes, this changed approach by SARS could spell trouble for taxpayers. According to the tax consulting firm, “it is no longer material whether the taxpayer concerned had justification for such non-disclosure or false statement made.

Further, this change to the audit request process means “SARS is actively cracking down on non-compliant cryptocurrency traders in South Africa.

“It is feasible to understand that SARS is in the process of ensuring culpable taxpayers who have not disclosed their cryptocurrency-related trading profits and losses'” – says Tax Consulting South Africa.

The organization surmises that the audit requests are the primary weapon in the SARS arsenal, and the walls are closing in on non-compliant cryptocurrency traders. Meanwhile, in his reaction to the SARS report Ben Zhou, the CEO of Bybit, a leading crypto derivates exchange, says this approach “leaves something to be disclosed.” Zhou explained, “The decentralized nature of cryptocurrencies represents the future of money and required a paradigm shift from current thinking.”

The proposal of a crypto regulatory framework should incorporate regulatory technology (Regtech) and crypto native solutions such as smart contracts and not default to the old standard showing its age in the age of digital payments and Central Bank Digital Currencies (CBDC). In the meantime, Tax Consulting South Africa is urging the country’s crypto traders who may not have disclosed their purchases to seek guidance to resolve this non-disclosure. At the same time, from the outset, this should know that all cryptocurrency transactions will bring tax consequences for a taxpayer, the company said. A tax disclosure obligation does not arise where a cash balance is withdrawn from a trading platform.

Taxpayers must disclose all transactions made regarding cryptocurrency for money or cryptocurrency for other cryptos to SARS. The organization adds that even if you have not purchased cryptocurrency in the past, you should proceed with caution when responding to an audit request.

“There is little doubt that SARS is pursuing non-compliant cryptocurrency traders, so it is best for these taxpayers to stay ahead of the curve and ensure that their tax affairs in order beforehand” –  the Tax Consulting SA said.

This development is coming in the wake of the Nigeria apex bank ordered all banks in Nigeria not to process all related cryptocurrency payments on their platforms, leaving the youths in dismay.

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