SARS is working on how taxes will apply to cryptocurrencies targeting such areas as cryptocurrency mining, trades on cryptocurrency exchanges, and the purchase of goods and services using digital money. It previously said it was working with global regulators on the matter.
The South African Revenue Service (SARS) is warning taxpayers that they could face penalties if they do not declare crypto gains and losses. For SARS, Bitcoin and Ethereum are intangible assets rather than a currency, for income tax purposes or capital gains tax.
SARS spokesman Sandile Memela said last year that SARS was discussing with global peers and was exploring options. Regulators around the world are looking for how to best regulate cryptocurrencies even as this affects prices.
Not a small headache for regulations
South Africa’s SARS is yet to finalize details on how value-added tax will apply on cryptocurrencies. The South African Reserve Bank is working with National Treasury, the Financial Services Board and the Financial Intelligence Centre. Since to develop a regulatory framework for the cryptocurrency industry.
The bank is yet to review the position of the monetary authority on cryptocurrencies that are privately issued. The bank will check on the risks relating to clearing and settlement, exchange control implications, cybersecurity considerations and the implications for monetary policy and financial stability.
That’s is not a simple headache or issue even with other regulators around the world. Some countries such as the U.S. allow traders and companies to report on tax willingly saying failure to do so might affect operations. But there are indeterminacies about taxation and reporting issues no matter how you look at it. This is especially given the nature of cryptocurrencies and blockchain because of their differentiating features. Thus which are their advantages over fiat and what makes them what they really are the pain points for regulators.
SARS says taxes could apply to cryptocurrency mining, trades on cryptocurrency exchanges. And the purchase of goods and services using digital money.
the revenue service said,
“Pending policy clarity in this regard, SARS will not require VAT registration as a vendor for purposes of the supply of cryptocurrencies”.
Additionally, taxpayers can claim expenses associated with cryptocurrency accruals or receipts. As long as the expenditure relates to income generation and for purposes of trade.
Starting with China’s ban on ICOs to South Korea’s termination of anonymous trading. It is a tough day for cryptocurrencies as they struggle to catch up with massive gains last year. That will not kill the hope though as crypto and blockchain enthusiasts. As it sees young, promising and vibrant tech that if sold to the world would improve on current banking and financial systems.
And the message is spreading slowly and having to deal with pushback from regulators. So, regulators have also responded differently with many opting to allow trading and ICOs as they think of better regulations.
Some like South Korea require transparency and sharing of information and some do not think that crypto falls in their regulation.