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Individuals who have invested and are trading in cryptocurrencies are now being audited by SARS (South African Revenue Services) and have been requested to provide more information regarding these investments.

Audit letters have been sent to several taxpayers requesting them to provide reasons behind their Cryptocurrency investments as well as confirmation for them.

SARS is currently improving their technical expertise to better trace taxpayers who make use of Cryptocurrency platforms for trading and are already including source codes for profits (2572) and losses (2573) within the capital gains portion of tax returns.

trading in cryptocurrencies
What needs to be declared?

Individuals are now required to disclose information regarding their Cryptocurrency trading in their tax return. This includes all transactions, not only cash outs. Therefore, if you have bought, exchanged or been compensated in Cryptocurrency, you are required to declare this on your tax return.

Since Cryptocurrency is not considered actual currency, you will only be required to pay tax when cashing out on your investments. These pay outs will be taxed as either income tax or capital gains tax.

How much will I be taxed?

Short-term Cryptocurrency investors will pay tax at their personal income tax rate, while long-term traders will pay at a capital gains tax rate. It is also relevant to note that unlike shares, your Cryptocurrencies’ purchase price is determined on the date you received it.

As for the individuals mining Cryptocurrencies, taxation is still unclear.

Penalties for nondisclosure

Noncompliance for Cryptocurrency trading will be charged in the same way as normal noncompliance on your tax returns. Taxpayers who do not disclose this information are subjected to fines and possible criminal charges. Penalties also have the potential to be more than triple the initial amount owed, excluding interest.

SARS actively works to make the process easier for compliant taxpayers, or those looking to come forward and declare their noncompliance. If you have been trading in cryptocurrencies and need to become tax compliant, reach out to our taxation team for advice on issues such as the Voluntary Disclosure Program.

MMS group offers professional and reliable tax services to individuals and businesses alike. If you need assistance on your taxation, please get in touch.