According to a report by MoneyWeb, the South African Revenue Service (SARS) is working with several firms to track and tax Bitcoin trades.
While reports issued earlier this year indicated that South Africa’s Reserve Bank has been trialing cryptocurrency regulations in a sandbox (testbed) setting, MoneyWeb has claimed that the South African Revenue Service (SARS) is working to track and tax Bitcoin trades.
According to MoneyWeb, Bitcoin’s recent price gains has posed a serious threat to SARS’ revenue collection efforts, which themselves are reliant on each traders’ declaration of profits.
Traditionally, financial institutions employ Anti-Money Laundering (AML) and Know Your Customer (KYC) measures to verify both the identity of traders and the scope of their profits or losses, though emerging businesses dealing in cryptocurrency do not have to face sufficient legislation in South Africa.
In a statement to MoneyWeb, Dr Randall Carolissen – group executive for research at SARS – elaborated that the service is seeking advice on how to effectively track cryptocurrency trades. “Without revealing too much – we are talking to some of the top technology companies in the world that (are) doing similar work for Canada and the UK and we are hoping to get that technology”, Carolissen offered.
Carolissen confirmed that SARS is working with the South African Reserve Bank to match the flow of funds within the country to the actual movement of goods and is following the Organisation for Economic Cooperation and Development’s (OECD) recommendations on how digital currencies should be treated.
According to Carolissen, cryptocurrency investments might be subject to Capital Gains Tax as opposed to Income Tax.
SARS, however, has not yet issued a form declaration. In 2014, the South African Reserve Bank resolved that it did not regulate nor oversee virtual currencies in terms of their effectiveness or integrity, and that digital currency trading would be solely to an end user’s risk.
The revelation comes on the back of two varying moves from other territories around the world. Namibia, South Africa’s north-western neighbor, recently moved to ban all transactions issued in digital currencies and has officially declared that it does not acknowledge any such cryptocurrency as legal tender.
In the United States, the US Senate is similarly drafting a new bill that would effectively criminalize the non-disclosure of cryptocurrency portfolios, which could essentially open the floodgates to tax.
What are your thoughts? Could, and should, the South African Revenue Service effectively trade and tax cryptocurrency trades? Be sure to let us know your opinion in the comments below!