According to a report, the South African Revenue Service (SARS) has issued an audit request to taxpayers to disclose their cryptocurrency transactions and purchases. Taxpayers who fail to properly disclose their income from Bitcoin or other cryptocurrencies may “be fined or imprisoned for up to two years.”

SARS tracks taxpayers in violation of regulations

In this report based on the statement of the South African Tax Consulting Company, cryptocurrency traders are now required to state the purpose of purchasing digital assets. In addition, cryptocurrency traders must submit “a letter from the trading platform to confirm the investment and the relevant transaction plan for the relevant period and bank statement.”

However, as observed by South African Tax Consulting, this changed approach to SARS may cause trouble for taxpayers. According to the tax consulting firm, “whether taxpayers have reasons to disclose such confidential information or make false statements is no longer important.” In addition, the changes to the review request process mean that “SARS is actively combating non-compliant encryption in South Africa. Currency traders.”

“Understandably, SARS is trapping taxable taxpayers who have not disclosed their cryptocurrency-related trading profits and/or losses,” said the South African Tax Consulting Company.

The organization speculates that the audit request is “the main weapon in the SARS arsenal, and non-compliant cryptocurrency traders are closing the wall.”

Need a new paradigm

At the same time, the CEO of Bybit, a leading cryptocurrency derivatives exchange, said in his response to SARS “giving cryptocurrency the attention it deserves” this week that this approach “makes people look forward to it.” Zhou explained:

The decentralized nature of cryptocurrency represents the future of currency and needs to be transformed from the current mode of thinking. The recommendations of the cryptocurrency regulatory framework should combine regulatory technology (Regtech) and native cryptocurrency solutions such as smart contracts, and do not default to using old standards that show its long history in the era of digital payments and central bank digital currency (CBDC) .

At the same time, Tax Consulting South Africa is urging cryptocurrency traders in the country who may not yet disclose purchase information to seek guidance. The organization added: “Even if you have not purchased cryptocurrency in the past, you should exercise caution when responding to audit requests.”

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What do you think of SARS’s new cryptocurrency taxation method? Tell us what you think in the comments section.

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