An expert consultant believes that the steady adoption of cryptocurrency in the country will soon be regulated by crypto taxes
According to Mazars, an international accounting and consulting group, the growth of the cryptocurrency industry in South Africa will be supplemented with stricter taxes in the near future.
In the last five years, the country has become one of the world’s most outstanding adopters of cryptocurrency, with around 13 percent of its internet users already owning or using cryptocurrency.
As the South African Bitcoin to ZAR weekly trading volume approaches R30 million, the consultancy believes it is safe to expect the South African Revenue Service (SARS) to be aware of the gains made by South African taxpayers who are trading in cryptocurrencies.
Wiehann Olivier, a partner at the audit division of Mazars, South Africa, believes there are several techniques that could be implemented by the SARS regarding the direct taxing of cryptocurrencies.
He highlighted the fact that cryptocurrencies could be used as a means of tax avoidance because they were created to allow seamless, anonymous, and trusted peer to peer transactions to be conducted through the internet.
Olivier notes that while SARS is currently depending on the honesty of South African taxpayers to input their gains on cryptocurrencies as a part of their taxable income, there are also many ways to conceal these assets.
Investors can opt to store their cryptocurrencies in paper wallets, foregoing custodians such as exchanges so that it is difficult to track their movements and confiscate these cryptocurrencies.
“There is also the option to rely on a series of smoke and mirrors. Different types of cryptocurrencies can be exchanged for one another and passed through a series of wallets and public key addresses to attempt to confuse the trading activities and to evade taxes.” he elaborated further.
“SARS has not yet released any specific legislation around the taxation of cryptocurrencies, besides that taxpayers need to include any realised gains from the trading of crypto currencies in their taxable income. However, we believe that SARS will publish new regulations in the coming years to have a more specific focus on these digital assets.”
One such intervention may involve the introduction of regulations that would mandate all crypto exchanges in South Africa to share information with the SARS.
Olivier stated that as early as now, businesses should start preparing for the tighter regulation of digital assets. This would help ease crypto firms ease their way into the implementation of such interventions in the next few years.
“The regulation of digital assets in South Africa could even bring exciting business opportunities for many entrepreneurs and businesses,” Olivier said.