You need to declare your cryptocurrency holdings to SARS
Since last year, taxpayers with returns selected for verification need to declare their cryptocurrency holdings to SARS.
It’s important to note that you should check with your accountant that full and true declarations are made to SARS. Reason being that the risks and consequences could be substantial.
Many cryptocurrency owners may not know that their cryptocurrency gains will be taxable by SARS in the year of assessment in which income or gains are received or accrued.
Bitcoin’s price started to skyrocket in September 2020 as big-name companies began to accept it. Early in 2021, the price of Bitcoin reached a staggering $60,000 and in February it breached the $1 trillion market capitalisation mark.
Locally, investors would have seen the price of their bitcoin jump from below R100 000 in March 2020 to almost R1 million in April 2021. Consequently, many South Africans jumped on the bandwagon by investing in cryptocurrencies. And it’s said that South Africa was among the top four highest growth locations.
Therefore, it comes at no surprise that SARS would turn its attention to cryptocurrencies. After all, substantial taxes can be collected from this source.
That’s why South African cryptocurrency investors should be aware of the tax liability they could be facing.
SARS will request information on what the purpose was for the cryptocurrency purchase, bank statements and a letter from the trading platform confirming the investments and relevant trading schedules for the period.
Do take note that it’s a criminal offence for taxpayers to willfully fail to submit a document or information requested by SARS, or to make a false statement. The consequence of non-compliancy is a fine or imprisonment of up to two years. The penalty for tax evasion is up to five years’ imprisonment.
So, the long and short of it is: if you mined cryptocurrency; bought any cryptocurrency; exchanged cryptocurrency for another cryptocurrency; or were in any way paid in cryptocurrency, it must be declared. As with other asset classes, investors should make a point of understanding cryptocurrency investments and the attendant tax obligations. Then you’ll be able to plan accordingly.