SARS is Going After Potential Crypto Tax Evaders in South Africa
In a bid to identify tax evaders, the South African Revenue Service (SARS) is actively working towards identifying and tracking various transactions carried out by cryptocurrency traders.
The agency’s main agenda is to identify those making money from their cryptocurrency transactions and ensures that these people pay the appropriate tax.traders.
The agenda was made known why the agency’s director, Mark Kingon, during an Institute of Internal Auditors conference held in the Sandton, according to IOL Mark Kingon said:
“The most important thing is identifying individual trading actively because it’s easy to say cryptocurrency gains must be deductible, but there are also those who lose. Identifying the traders will make the process of tax deduction easy and straightforward.”
He added that “being able to identify transactions on the blockchain will also help greatly towards identifying corrupt government official moving stolen money, drug dealers, kidnappers and the likes.”
The tracking of cryptocurrency transactions is made possible due to the transparent nature of the blockchain. The public ledger design of the blockchain is in such a way that every transaction on a public blockchain can be read by a third-party. As a result of this transparency, it becomes possible to track any transactions once the starting point is located.
Several methods for identifying the real-world identities of bitcoin holders have been developed over the years. Chain analysis, linking IP addresses to bitcoin transactions, and wallet address clustering are three of the most popular bitcoin de-anonymisation methods currently being applied by law enforcement agencies and tax authorities.
In South Africa, cryptocurrencies are not recognised as a payment method or currency. Therefore they are not classified under the income tax or capital gain act. Instead, cryptocurrencies are being classified as assets of an intangible nature.
Therefore, it becomes crucial for citizens and residents of the country engaging in cryptocurrency trading, to ensure that a proper filing of their profit and loss trading cryptocurrency is included in their taxable income report.
SARS confirms that it now has a fully functioning procedure for identifying non-complying traders and any trader found guilty of tax evasion will face the full wrath of the law.