Your crypto assets might live in the virtual world, but SARS is determined to bed down the tax rules on cryptocurrencies and turn your digital assets into tangible tax. On August 27 2021, SARS clarified how your crypto assets must be declared in your tax return and published a web page called Crypto Assets & Tax. SARS is taking non-compliance in this area very seriously and is determined to clarify any misconceptions around cryptocurrencies and tax. These include the following:
You need to disclose your crypto assets
A popular misconception is that if you don’t trade your assets, you won’t have to disclose them to SARS. However, the 2020/21 tax return specifies that you MUST make specific disclosure under the Statement of Local Assets and Liabilities section. This means that if you have acquired and held onto crypto assets during the tax year, you must disclose your holdings to SARS regardless of whether any taxable events took place.
If you do not make this disclosure, even negligently, it is regarded as a criminal offense under the Tax Administration Act
Income Tax versus Capital Gains Tax
There still seems to be confusion as to whether crypto-assets fall into Income Tax or Capital Gains Tax. In countries where both are subject to the same rate of taxation, this is irrelevant. However, in South Africa, the top marginal personal income tax rate is 45% and the top marginal capital gains tax rate is 18%. The web page provides no examples of income tax disclosure, which means that cryptocurrency holders need to tread carefully when submitting their tax returns.
You can’t remain invisible
There is no legitimate way for crypto asset investors to hide from SARS and your non-disclosure now, will be a permanent black mark against your name. To prove their determination to enforce the law in this area, SARS has appointed specialists to deal with crypto assets.
So to summarise, it’s impossible to hide from SARS under the guise of the fact that you are not trading your crypt assets. Any crypto asset holdings must be declared in your tax returns or you will be held accountable.
For expert advice in the submission of your income tax and the correct way to declare your crypto assets, contact our experienced tax team today.