The South African Revenue Service (SARS) has intensified its scrutiny towards crypto merchants in the country. Recently, the regulator notified crypto traders that their tax compliance was being investigated.

Notably, this move by the SARS strengthens its resolve to enforce regulatory compliance in the South African crypto industry. It mirrors the country’s official recognition of crypto exchanges as financial institutions, ahead of many African countries.

Intensified Measures by the SARS

Consequently, the regulator mandated all Crypto Assets Service Providers (CASPs) to report certain information to the SARS. Any exchange failing to adhere to these directives is inadvertently committing a criminal offence, according to the nation’s Tax Administration Act. This is in line with effective revenue collection, including crypto trading tax.

In addition, the SARS has incorporated AI technology to monitor crypto merchants in the country. Adopting this approach prepares the SARS to monitor the technicalities in crypto asset trading effectively.

Moreover, the South African Reserve Bank (SARB) establishes that it does not prohibit crypto purchases unless outside regulations. These include individuals purchasing personally up to R1 million per year using their single discretionary allowance.

Also, individuals can purchase crypto assets with their foreign capital allowance, but this has to be verified by the SARB. Furthermore, companies (juristic entities) are more restricted as they are not permitted to invest in crypto.

Tax Implications for Crypto Traders in South Africa

Profits from sales of crypto assets are subject to capital gains tax with the taxing rate dependent on how long the crypto assets were held.

Furthermore, Value-Added Tax (VAT) may apply to some crypto transactions on various exchanges in the country. Then there’s income tax subtracted from a crypto trading business.

So crypto traders must maintain detailed records of all their transactions and acquaint themselves with the country’s tax laws and regulations. Consulting tax professionals and proper tax planning would also ensure compliance.

By complying with the rules, they can navigate the evolving regulatory landscape in South Africa and minimize legal and financial risks.