In late August, the South African Revenue Service (SARS)
released new guidelines that clarify the correct treatment of taxable
crypto events. The new guidance, which was published on the revenue
collector’s webpage, explains how cryptocurrency-related income should
be disclosed in tax returns.
Distinction Between Income and Capital Gains Tax
As shown
on SARS’ crypto-asset tax webpage, “income received or accrued from
crypto assets transactions can be taxed on revenue account under ‘gross
income.'” Alternatively, the new guidance says such gains “may be
regarded as capital in nature, as spelt out in the Eighth Schedule to
the Act for taxation under the Capital Gains Tax (CGT) paradigm.”
SARS also reveals that “taxpayers are also entitled to claim expenses
associated with crypto assets accruals or receipts, provided such
expenditure is incurred in the production of the taxpayer’s income and
for purposes of trade.”
Meanwhile, a tax consulting firm, Tax Consulting SA, told to
Bitcoin.com News in an email that the publication of the guidance should
perhaps be best viewed in the context of the various comments recently
made by SARS on the taxation of crypto assets.
As previously reported
by Bitcoin.com News, South African crypto holders found on the wrong
side of the law now face possible jail time. Similarly, Tax Consulting
SA asserts that the new crypto asset tax guidance is another reminder of
how SARS now sees crypto tax as an important revenue source and the
extent to which it will go to enforce compliance.
The Cost of Not Disclosing
Consequently, in its analysis of the new guidance, the Tax Consulting
SA team says “all individuals who have acquired and held crypto assets
during the tax year must disclose these holdings to SARS in their
returns, regardless of whether any taxable events took place.” The team
cautions however that “this is easy to get wrong and taxpayers should be
sure to tread carefully.” Tax Consulting SA also warned:
Where you do not make this disclosure, even negligently, this is now a criminal offence under the Tax Administration Act.
Concerning the “confusion” on whether a taxable event should be
treated as income or capital gains tax, the consulting firm insists that
the “information published [by SARS] earlier this week only gives
examples of capital gains tax disclosures.” Also, since the revenue
collector has not given examples of income tax disclosure, it “means
taxpayers may fall on the wrong side of the law by just following the
guidance provided by SARS.”
Yet, despite this lack of clarity, Tax Consulting SA insists crypto
holders still have to disclose because “there is no legitimate way for
crypto asset investors to remain ‘invisible’ from a SARS perspective.”
The firm argues that “non-disclosure is permanent and [that this] will
come back in a few years to catch up with the taxpayer.”
source link : https://news.bitcoin.com/south-african-tax-body-updates-crypto-tax-guidance-confusion-persists/
