Are You In Debt To SARS?
Finding yourself in debt to SARS can be an overwhelming experience, and the situation can become even more challenging if you have neglected to account for your cryptocurrency profits. If you have dabbled in crypto trading, even casually, being unaware of the accompanying tax liabilities could lead you down a dangerous path.
Understanding Crypto Assets
The Taxation Laws Amendment Act, 23 of 2020 established the definition of a “crypto asset”. As per SARS, it is described as a virtual representation of value not issued by a central bank but traded, transferred, and stored by individuals. This value is used for payment or investment and includes cryptographic techniques in its fundamental technology.
SARS is Ahead of the Game
Like any other capital gain or revenue, the responsibility of reporting falls on the taxpayer. If they neglect to do so, they may face penalties and interest for under-declaration, which could be viewed as a criminal offence.
Given the unpredictable nature of cryptocurrency markets, it is not uncommon for substantial profits or gains made in a tax year to have drastically fluctuated by the time tax filing season arrives. These fluctuations result in a diminished value for crypto-asset holders, where, in some cases, even liquidation of entire crypto holdings would not be enough to cover the tax debt owed to SARS.
Rectifying Crypto Tax Debt
SARS follows a standard procedure for any outstanding tax debt, including those related to crypto assets. This process involves sending the taxpayer a Letter of Demand outlining the amount of outstanding debt and providing a deadline for repayment. However, SARS often leaves out that tax laws provide several tax debt relief measures designed to offer respite and a practical path forward. Should taxpayers lack the legal grounds to dispute tax debt resulting from their crypto trading yet struggle to fulfil this obligation, they might be eligible to apply for a Compromise of Tax Debt.
Compromising With SARS
Dealing with SARS can be tricky, and taxpayers must be aware and knowledgeable about potential tax debt. If you are faced with tax debt due to crypto assets, acting swiftly can avoid the accumulation of additional interest and penalties. Our tax consultants offer professional assistance to help you navigate tax debt negotiations and regain SARS compliance. Reach out to our team for more information.
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