The South African Revenue Service (SARS) is cracking down on digital currency traders for tax purposes. According to local reports, SARS has been sending audit requests to taxpayers, requesting them to disclose their digital currency trades.
The tax agency’s audit request is the first requiring South Africans to disclose their digital currency activities, local tech news outlet MyBroadband reports. It cited Tax Consulting South Africa which revealed that it had been approached by several clients who required guidance on how to respond to the audit request.
The request asks the taxpayer if he has purchased digital currencies in the past year. If so, he must indicate the purpose for which he purchased these digital currencies. In addition, the taxpayer must attach a letter from the trading platform to confirm the trades, as well as a bank statement corresponding to the purchases in the relevant period.
According to the consulting agency, SARS sent the audit requests to tax payers irrespective of whether they had traded digital currencies, indicating it was more of a fact-finding mission for the tax agency.
“This would have been reasonably expected by the taxpayers, if they had made any disclosure of cryptocurrency-linked trading amounts in their returns, along with the rental amounts and certain investments that were indeed disclosed to SARS,” the consulting agency told the outlet.
“However, in this case, we had explicitly confirmed that the taxpayers had not, to their knowledge, ever effected a cryptocurrency-related transaction.”
Nevertheless, the agency is urging South Africans to respond to the requests honestly. It’s a criminal offense to fail to respond to an audit request by the South African government or to submit false information, it reminded taxpayers. Such an offense could attract a huge fine or imprisonment of up to two years.
The audit request proves the South African government is finally cracking down on digital currency tax evaders. While the government has yet to formulate a regulatory framework for the industry, it’s well within its right to levy taxes.
It has already happened in India, where the government has proposed an 18% tax on digital currency trading. This is despite the Indian government reportedly working on a law that will ban digital currencies in the Asian nation.
Tax Consulting South Africa added, “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 are in order beforehand. While this is certainly a first, it is certainly the kind of approach by SARS that taxpayers should expect moving forward.”
See also: CoinGeek Live panel, Digital Currency & Global Compliance: Tools & Tips for Exchanges, Wallets & Other Service Providers
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