A South African tax expert, Thomas Lobban, has warned crypto traders who do not pay taxes that they are now facing a possible jail sentence if the South African Revenue Services (SARS) decide to take tax crimes against them. He adds that this prison sentence similarly applies to South African crypto traders who use offshore exchange platforms to trade or store their crypto assets.
Accused of lack of guidance
Lobban’s warning follows reports earlier this year suggesting changes to South African tax laws may have “made it easier for SARS to get criminal convictions” for tax offenses. The warnings also follow reports in June suggesting that SARS had “asked independent South African crypto platforms to provide it with information about its customer base.”
Despite this harsh warning, Lobban – a legal manager at a local tax consultancy firm, Tax Consulting South Africa – admits that many crypto traders are unaware of the size of their tax debt. The expert partially blames SARS, which in his opinion has not done enough to guide crypto holders. He explained:
The lack of meaningful guidelines from SARS also did not help the situation, so crypto investors only have their own best guesses about the correct tax treatment in each case.
Lobban also blamed what he calls “very strange beliefs about taxes and crypto assets” as the other main reason many crypto holders fail to pay taxes in full. He said that because of these beliefs, many crypto traders still think that tax liability only arises “on withdrawal”.
South Africans trading on foreign crypto exchanges are also targeted
The tax expert also notes that while SARS appears to be “reluctant to provide guidance on correct tax treatment”, it is still working to improve its information-gathering mechanisms. It is such mechanisms that the collector hopes to use in tracking South African crypto holders trading on offshore exchanges. Lobban said:
SARS may request the collection and provision of information relating to a taxpayer from other tax authorities around the world, as well as assistance with the collection of taxes under the many existing tax treaties.
Meanwhile, Lobban urged South African cryptocurrency holders and traders unsure of their tax obligations to “approach SARS first and include crypto gains and losses in their returns.” This will keep them in the good books of SARS and avoid sanctions.
For those with an outstanding historical tax debt, Lobban says, there are options for correction without the threat of criminal liability. However, once SARS notifies them of an upcoming or potential audit, it severely limits the options available to taxpayers.
What are your thoughts on this story? Let us know what you think in the comments section below.
Photo credits: Shutterstock, Pixabay, Wiki Commons
Disclaimer of liability: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement for any product, service, or company. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author are directly or indirectly responsible for any damage or loss caused or allegedly caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.