The South African Revenue Service (SARS) could bring in stricter taxes for the country’s cryptoasset holders in the near future, potentially hampering the development of an industry that has emerged as Africa’s biggest, analysts claim.
Wiehann Olivier, a partner in the auditing division of international accounting and tax consultancy Mazars’ South African branch, said, in a statement emailed to Cryptonews.com, that the country’s tax authority is set to introduce a number of measures that would see crypto traders in the nation taxed on their earnings and token holdings.
Olivier said he believed the introduction of stricter tax rules for South African crypto owners was a virtual certainty within the next few years.
“SARS has not yet released any specific legislation around the taxation of cryptocurrencies, besides that taxpayers need to include any realized gains from the trading of [cryptoassets] in their taxable income. However, we believe that SARS will publish new regulations in the coming years to have a more specific focus on digital assets.”
Olivier added that these interventions could include regulations requiring all South African crypto exchanges to share information with tax authorities, although he added that such steps would require technical know-how acquisition from SARS so that the service could “gear itself to ensure that it can collect on what it is owed.”
SARS currently expects South African taxpayers to report their crypto trading gains, but new measures could seek to ensure all of the nation’s traders actually adhere to these rules.
Olivier added that traders use a variety of methods to avoid taxation.
“[Cryptoassets] were created to allow for anonymous, frictionless and trusted peer-to-peer transactions to be conducted over the internet (including cross-border transactions). That means that they can be used as a means of tax avoidance in a number of different ways.”
Some traders might opt to use “smoke and mirror” tactics in a bid to avoid crypto taxes.
The Mazars partner added,
“Different types of [cryptoassets] 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.”
A report produced by crypto research firm Arcane Research earlier this year found that South Africa was ranked third worldwide in terms of crypto ownership, with a 13% adoption rate among internet users.
It was also the leading country in Africa, followed by Nigeria, which was ranked fifth globally with an 11% adoption rate – both well above the global average of 7%.