Crypto Crackdown: SARS Targets South African Traders

4 Min Read | 850 Words

In the ever-evolving landscape of taxation, staying informed is essential for finance professionals. The South African Revenue Service (SARS) has made its stance on cryptocurrency clear: failing to declare profits could result in severe penalties, including jail time. With over 5.8 million South Africans holding crypto assets, the taxman is turning its attention to the growing digital currency market. For us, as aspiring Chartered Accountants, understanding these developments is critical as we prepare to navigate a world where digital currencies are becoming mainstream.

Fun Fact
Did you know? 🔍 Bitcoin, the first cryptocurrency, was worth less than $0.01 in 2010. Today, its value fluctuates around $60 000, making it one of the most volatile assets in modern finance! 💰📈

SARS Clamping Down On Crypto

If there is one government function that we know works it has to be The South African Revenue Service (SARS) and its tightening its grip on crypto traders. As digital currencies grow in popularity, SARS is issuing a stern warning that failure to declare crypto-related profits could result in significant penalties, including jail time. With over 5.8 million South Africans now holding crypto assets, the tax authority’s attention has firmly shifted to this rapidly emerging financial sector.

The Compliance Push
SARS recently reinforced its commitment to regulating the crypto space by urging South Africans to use its Voluntary Disclosure Programme (VDP) to declare their crypto assets. It highlighted concerns about taxpayers failing to declare crypto trades on tax returns, which is a legal obligation under South African tax law. With information now flowing from local crypto exchanges directly to SARS as part of their collaboration with the FSC, non-compliance is becoming harder and more costly for traders.

Crypto Under The Tax Net

For a long time, those in the crypto space have pushed for a ‘zero-regulation’ financial sector, however any reasonable person has to consider that the space has no prospects for long term viability following this mindset, the financial professional’s in the industry have countered this arguing for a middle ground between decentralization and regulation with a significant number of chartered accountants having been consulted for the drafting of clear cut crypto tax rules.

However the general consensus of the crypto industry is that the government doesn’t deserve a piece of their pie, this has led to a significant portion of traders simply neglecting the tax compliance. This ultimately also perpetuates a misconception among retail investors, with less insight into the crypto space, that it falls outside of the tax net.

However, crypto assets are considered financial instruments under the Income Tax Act. This means profits are subject to taxation, whether realized in fiat currency or not. Additionally, tax rules apply to various crypto transactions, including capital gains tax, income tax, and VAT in some cases.

Where Do We Fit In

As students and professionals aspiring to the CA(SA) qualification, it’s important to look at these news points and understand that we fall at the forefront of change. Industries such as crypto bear major uncertainty however, this brings an equally ample amount of opportunity.

I’ve highlighted some key points to keep us thinking in the week of lectures up ahead:

• Understanding Emerging Tax Regulations
  - Aspiring CAs will need to stay ahead of changing regulations, such as crypto tax, to provide accurate advice to future clients. Knowledge of SARS’ evolving approach to crypto assets is crucial for staying compliant in this rapidly shifting environment.

• Becoming Crypto Advisors
  - For those of us who find ourselves as professional advisors, as digital currencies gain traction, we will be uniquely positioned to guide clients on how to navigate their risk appetite within this sector. The demand for financial professionals who understand both traditional finance and cryptocurrency will rise, offering opportunities for specialized advisory roles.

• Leveraging Technology Proficiency
  - A major trend I’ve picked up on, is the growing number of up and coming CAs with an interest in information technology and alternative tech such as blockchains. This knowledge can create a competitive advantage in pioneering work place application and broader spectrum crypto solutions.

Roundup
As SARS ramps up its focus on crypto assets, the message is clear: compliance is non-negotiable. For South African crypto traders, it’s crucial to declare all crypto-related activities to avoid facing the full weight of tax law. With the rapid growth of the digital currency space, keeping up with evolving regulations is essential and for us aspiring finance professionals we’re presented with a gold rush of opportunity.

Technical Takeaways

We’ve teamed up with Dillen Breitenbach from Accounting Warriors to bring you concise, actionable technical highlights from our articles.

Video Suggestion

Sign Up for Trainee Contract Opportunities

For those of you working toward your CA(SA) qualification, we’ve got great news! As a subscriber to The Journal Entry, we’re doing our best to find article program opportunities for you.

Don’t miss the chance to grow your professional network and take that crucial step toward your CA(SA) designation.

Be sure to fill out the sign-up form linked below to stay informed about upcoming trainee positions!

Resources

We’ve compiled a list of our favourite value-packed finance and other resources, including industry relevant courses from Wall Street Oasis.

Check them out!

Make Your Mark On “The Journal Entry”

Fill out the form below with any content topics you’d like to see us cover.

Share The Journal Entry

If you enjoy our content we’d love it if you showed your friends and peers!

Or copy and paste this link to others: