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Yes, Sars wants to track your bitcoin trades

Lack of third party verification data makes crypto profits a risk area.

The South African Revenue Service (Sars) is in discussions with some of the top technology companies in the world to enable it to track cryptocurrency trades more efficiently.

Interest in cryptocurrencies, like bitcoin, has risen significantly, but since the environment is fairly opaque, regulators around the world are still struggling to formulate a plan to deal with it.

The exponential rise in the price of bitcoin in particular poses a threat to Sars’ revenue collection efforts as it is largely dependent on traders’ own truthful declaration of profits. Financial institutions like banks are required to supply Sars with information on the investments of their clients for verification purposes, but in a crypto environment where such information is lacking, Sars may have to trust that a taxpayer made honest declarations with regard to crypto gains.

Dr Randall Carolissen, Sars group executive for research, says Sars is having discussions with its counterparts on how to track cryptocurrency trades.

“As you can imagine it is very difficult – the blockchain technology. 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.”

Sars is also strengthening its relationship with the South African Reserve Bank (Sarb) to look more critically at matching the flow of funds in and out of the country with the actual movement of goods as there is “room to hide things”, he says.

“At the moment, we are treating cryptocurrency in the same way as capital realisation – so in other words, it is like a Krugerrand. If you buy it at a particular point and you then sell it, you will be faced with a capital appreciation and then we will treat it as Capital Gains Tax.”

Carolissen says Sars is working through the Organisation for Economic Cooperation and Development’s (OECD) recommendations, which include quite detailed information on how cryptocurrencies should be treated.

He concedes that Sars hasn’t had any major declaration thus far.

“We were part of the OECD working groups and that has certainly been incorporated into our policy environment. So we are on top of it. In fact, South Africa is cited as one of the leading implementers of this cryptocurrency environment.”

Ruaan van Eeden, managing director for tax and exchange control at the Geneva Management Group, says the firm is receiving an increasing number of questions about the exchange control and tax treatment of cryptocurrencies.

In a position paper issued by the Sarb in 2014, the bank stressed that it did not oversee, supervise or regulate the virtual currency (VC) landscape, systems or intermediaries for effectiveness, soundness, integrity or robustness.

“Consequently, any and all activities related to the acquisition, trading or use of VCs are performed at the end-user’s sole and independent risk and have no recourse to the bank,” it said.

Van Eeden says the question of how crypto profits or gains should be dealt with is a subjective one, dependent on the facts of each particular case. Currently, most taxpayers deem it a normal asset class which is not held for speculative or trading purposes. It follows that any gains would likely be subject to Capital Gains Tax as opposed to income tax, however, this would generally be determined with reference to the intention of the taxpayer on acquisition or disposal of the asset.

Many bitcoin traders have made significant profits. This poses a risk to Sars as there may be uncertainty about the income tax treatment and, potentially, Value-Added Tax. Moreover, taxpayers may not have declared these profits at all, Van Eeden says.

As cryptocurrencies become more sophisticated, one should expect more stringent regulation, he adds.

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LOL – they will find it virtually impossible to crack the bitcoin blockchain for info!!!

I do hope that you realise that, unless you have been making careful use of tumblers, Bitcoin is anything but anonymous. The blockchain is an eternal and practically unchangeable record of all BTC transactions EVER.

https://bitcoin.org/en/you-need-to-know

Some things you need to know:

Some effort is required to protect your privacy with Bitcoin. All Bitcoin transactions are stored publicly and permanently on the network, which means anyone can see the balance and transactions of any Bitcoin address. However, the identity of the user behind an address remains unknown until information is revealed during a purchase or in other circumstances. This is one reason why Bitcoin addresses should only be used once. Always remember that it is your responsibility to adopt good practices in order to protect your privacy.

I know the “top technology” companies they would consult to try and track cryptocurrency trades. Gooooooood luck SARS, they just going to get shanked on consultant fees and the advice is this; “not worth the effort yet, await further instruction while we build systems.” Do you know how difficult it is to track traditional funds in multiple, sometimes hostile, jurisdictions and impose compliance? Also, where is the Gupta money? Fear mongering article. Bullish

PS: Make sure your funds are out of SA anyway, regardless of investment type.

My understanding is that currency gains are not deemed to be capital gain or income. Why are cryptocurrencies treated different?

Bring back our tax money from Dubai… and collect tax payable on Nkaaaandla. And do a full and proper audit on Oakbay and the Guptas… then let’s talk 😉

Until our money, South Africa money comes back from Dubai we shall boycott them!

Short them.

Cryptocurrency trading is pure speculation currently and therefore regarding these trades as capital in nature seems to be correct. So taxing the capital gain would be route to follow. This implies that losses would therefore be allowable. If this very immature industry happens to fold like a house of cards and speculators lose money, so will SARS – big time. I wonder if SARS has thought this through?

Shouldnt it be taxed as income, since you’re making short-term speculative gains.
Secondly, incredibly easy to track since the Blockchain is completely open just the name is missing – can find the name by asking an exchange for the KYC details of the source bitcoin account.

No-one is really using it to purchase, so you can build up a database of wallet owners quite quickly.

I agree. Bitcoin (and any Altcoin) trades will be just that…speculative “trades”. It’s done rather in a “repetitive/frequent” nature….and not with a once-off long-term investment goal in mind. So, theoretically you’re right: it should be (fully) taxed as INCOME (not as a CGT gain)…hence profits be taxed exactly how one pays tax on your salary, pension, business income etc).

Its going to be very interesting to see how SARS approaches this matter – If they classify it as a legitimate currency any exchange rate gains or losses will be exempt – But Bitcoin is not regulated so it might be classified as a share so any gains and losses will be subject to CGT – If you actively trade bitcoin then SARS will classify you as a trader and you will be subject to income tax at your marginal rate.

No one knows whether cryptos may be classed as a asset (those holding and gaining from it) or as a currency. One thing is for sure: it falls within the Tax Act’s “scheme of profit making” provision. Full tax on generation of income, thus 🙁

How it will be picked up & taxed by any tax authority like SARS, is open to what technology will allow them, and if collected cost-effective.

A lot of tax court cases will come. Proponents of bitcoin (and altcoins) who argue that it’s an ASSET….there will be grounds devised to tax it as an asset, unfortunately. Sceptics of cryptos believing it’s all hot air and a speculative “scheme of profit making”….bam, SARS will gut us on that again.

SARS will have to wait and see how other tax jurisdictions approach it, and many years for law-makers will go by in catching up with legislation. The world ‘powers at be’ (banks,Govts) will not allow a virtual currency system to avoid tax revenue. It will be controlled. For now, the world’s central banks “allow” it, to see what will come if cryptos, and if they can somehow benefit through new blockchain tech.

Once again an example of collecting from the people that already pays all their taxes. SARS sees an opportunity to make up the stolen gap from Bitcoins. Kindly collect the gap from those who stole it and that already avoids taxes. But SARS’s sees only money. As Bitcoin is a currency its not supposed to be taxed. You don’t see Zimbabwe taxing their individuals for exchanging their R or $ to zim$ and making a profit now. Why don’t SARS start conducting audits on those who steal and hide at the moment, or start paying refunds in Bitcoins, or start paying refunds at all, because they like to keep the refunds for a wile.

We are going to pay capital gains tax to what, because the capital gains tax that we are going to pay is going to disappear, making the tax gap bigger. The more paid, means more stealing.

Good luck – they cannot even track their deputy head stuffing millions of bribe money into ATM’s.

Pay Tax for Zuma and his cronies? people that do not add value to South Africa?
instead they are destroying everything South Africa has worked hard for.

We pay very high Tax to pay very incompetent/idiotic people, let me explain,
government employs uneducated/incompetent people at salaries above the private sector, plus they have to pay for consultants/contractors to do their jobs.

The Tax Revolt has begun. Nearly 2 million South Africans have ignored SARS in 2017 tax season.

Lets short the ANC/Zuma, lets humble them.

Zuma and the ANC are nothing compared to our beloved Central Bank, i.e. SARB. If you learn or know how money is really created, and that we’re actually scammed everyday because we don’t really have to pay tax, you’ll redirect your anger to SARB too. If citizens create money (via government) instead of a private company (yes, SARB is a private company) creating money for us using debt at high usury rates, then there wouldn’t be a need for large taxes, since a large portion of our tax goes towards servicing interest of international banksters, and also the corrupt ANC stealing our money.

How flipping ironic. Now SARS wants to mount the moral high horse regarding an additional source of income while SARS itself only serves as the collection tool for a very corrupted and immoral cANCer party.

I an see the shelf companies being formed – “Sahara Blockchain Technologies”..

What would happen if you never sell your cryptocurrency but rather use it to buy goods through for example takealot? How would capital gains be calculated then?

That’s the original idea of crypto currency. The transaction will highly likely not be traceable (unless if you want to declare it and pay tax! 😉

In theory, only if you convert it back to ZAR into your bank account, it will show up as a large credit of your Bitcoin gains…and if (criminally) investigated, SARS will ask access to bank records, and will ask what the source of that large deposit is. (SARS does not have automatic access to your bank account, and only under “criminal” investigation…not normal audit we mostly deal with)

Bear in mind one’s (physical) accumulation of wealth is for everyone to see, and every tax authority can do random “lifestyle audits” (if they have enough skilled resources to make it more commonplace). Thus, keep your FIAT parked in the driveway, but store your Ferrari elsewhere…

O boy….soon we’ll see all the “exchanges” being regulated whereby they’ll have to issue “IT3c” CGT tax certificates 😉 (…even when such trades are more of a frequent/repetitive “income revenue” type as pure money speculation)

The “exchanges” (because they have all fiat currency accounts, in order to accept your fiat currency, and pay you eventually in fiat currency after you gained in Bitcoin/Altcoins) will become a SOFT TARGET for tax authorities globally, as their fiat-accounts can be closed/frozen if they don’t comply to costly regulation, and the “know your client” thing…FICA/FACTA/CRS..)

Note that once you cash in your crypto gains back into ZAR (or any other fiat ccy), it will reflect as a CREDIT in your bank account…and can be subject to SARS scrutiny if you’re so lucky to be criminally investigated (not referring to normal audit).

The ONLY way (I see it) to avoid tax on crypto gains, is to NEVER EVER convert back to fiat-currency (keep it in bitcoin, etc and buy services/products with it). But on the other end, it won’t last that long, because now all businesses globally offering Bitcoin/Altcoins, the pressure will mount on these businesses to also declare their Bitcoin-sales profits, and not only their profit made in fiat-currency bank accounts. Will cause those businesses to reconsider the cost.

Company profits made in cryptos (in the end) won’t be free from tax globally. Could likely be taxed through the “exchanges”. New inventive ways will be found from Govts, trust me….even a “trading tax” if global tax authorities cannot use blockchain to identity 3rd party verifications.
Only way for crypto “investors” to avoid tax, is that WE ALL trade our fiat currency (for the last & final time) into cryptos and nver convert back into a fiat-curreny gain. (…which one of the thousand altcoins and counting will survive long term, remains another question). In the end, all the “exchanges” sitting with mountains of fiat-currency (in exchange for virtual currency), will end up having to physically burn their mountains of fiat-cash. Ha! 😉

Hypothetically, would it be possible to transfer all my cash in SA to Australia by using Bitcoin? If possible, how?

Will it be possible to change bank details after buying bitcoin?

Will a person be able to bypass the $1m per year allowance?

Just asking out of interest 🙂

Yep, that’s all possible. Too lazy to give step by step guides 🙂

Thanks, I am sure google will be able to guide me!

It’s very funny in this day and age that people still think taxation is necessary, and that central banking isn’t largely a scam private company. It’s high time people learn how money is “really” created.

SARS and other tax authorities are fighting a losing game, with decentralized exchanges coming up. There won’t be any central authority in decentralized exchanges for tax authorities to request information from because KYC won’t be needed to be a member of a decentralized exchange.

Having said this, the use of decentralized consensus algorithms and blockchain will one day result in a system or protocol being created that will replace central banks, governments and the tax system.

“Death & Taxes”…always a certainly, since the beginning of civilization. If the current status quo (of central banks, Governments, tax) is eventually replaced, the population will just be “controlled” by a different system. Rather, I think existing Govts & the business world will be keen to use blockchain to their advantage.

The opposite is happening the past few years: thanks to the hard work of IT-specialists leading to ever-advancing technology, the global tax authorities are finding it ever EASIER to uncover hidden undeclared wealth in various havens. Once physical cash is totally replaced, all transactions will one day go through a super one-world “computer”…the little cash and carry shops also can’t hide…and EVERYONE will be easier traced. A Tax collectors dream. Yeah…bring on the technology!

The rich will continue to control the poor / broader civilization, no matter what technology leads us to the future.

Quote: “The more the world changes, the more it remains the same” (re human nature)

The word “decentralized” gets thrown around a lot when blockchain is discussed. Don’t be mislead: the blockchain verification/protocol is (mostly) CONTROLLED by the few global entities who have the biggest capital to afford to run super-expensive mining/verification technology.

Would love to pay ZERO tax (just imagine everyone with a third extra disposable income for individuals & businesses….we’ll make the economy buzz!) But think again: then EVERYTHING will have to be privatized. There will be so much civil chaos, as every time you need a road to travel on, or water water delivered to the house, or sewerage collected….you need to get a few quotes from private operators. Back to the Flintstones. TAX is unfortunately a function of a modern society, irrespective how useless many governments typically are globally in the opinion of their citizens.

I agree with you on most points. Going forward, only very large, controlled and centralized companies will be able to perform mining operations because of the issue of block sizes. We’re actually already seeing this. An individual with a home computer will never be able to mine bitcoin, because of the huge computational power to solve cryptographic algorithms so as to secure the network. So decentralization is not really decentralized in that instance. And because the adoption of bitcoin and other cryptocurrencies is growing, the resources needed to secure networks will only be able to be performed by centrally owned and controlled companies.

With a coin such as Monero, and other coins that allow private transactions, do you think it’s possible for tax authorities to still trace or link cryptos to an individual? Provided the individual used decentralized exchanges?

Yep, the rich will always control and have power over the poor.

Regarding tax, I think it is possible for a consensus algorithm, protocol or something of the sort to be created that might make taxes irrelevant. We’re already coming to the realization that banks are actually irrelevant if people have the power to control their own money through wallets. If a protocol can be created that allows money to be raised in a consensus manner, and oracles that will link the blockchain to real world activities, then it is possible for money that can be raised to be used to build roads, hospitals, pay government employees, etc. I can see this happening in future, provided governments don’t stop it or ban it which might kill the adoption of it.

Oh dear, I seem to have forgotten my private key

O my word! 🙁 How does the key look like?….I’ll let you know if I pick it up on the sidewalk. *lol*

(On a more serious note: I’m waiting for the person who’s going to tell his dog ate the piece of paper the private key is written on! Off to the vet for a stomach-op….)

So SARS which allowed Zumbo to not file a tax return for 5 years now wants to go after Bitcoin??

Good luck SARS but your credibility is in the dustbin next to the rusty showerhead!

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