Here’s why it’s not a good idea to hide your cryptocurrency earnings from Sars?
by admin · May 24, 2022
Should you tell Sars about your cryptocurrency winnings and losses? Haven’t you ever thought about it? Well, there are certainly tax implications, and even if you could get out of a crypto scam by considering yourself a winner, the taxman will be on your tail. The Mirror Trading International (MTI) scandal has been on the front page since early 2020 with some 260,000 investors, but it suddenly stopped when the main boss, Johann Steynberg, fled the country in December 2020. The company has now been liquidated and an application is waiting to declare it an illegal scheme, which will mean …
Should you tell Sars about your cryptocurrency winnings and losses? Haven’t you ever thought about it?
Well, there are definitely tax implications, and even if you could get out of a crypto scam by considering yourself a winner, the taxman will be on your tail.
The Mirror Trading International (MTI) scandal has been on the front page since early 2020 with around 260,000 investors, but it suddenly stopped when the main boss, Johann Steynberg, fled the country in December 2020.
The company has now been liquidated and a petition is pending to declare it illegal, which will mean that all “winners” – people who have withdrawn more than they “invested” – will have to return their “profits” so that the liquidators they can repay the “losers” who have not withdrawn anything and have lost the original investment.
Some of the “winners” have won big with 0.5% daily returns. Will management and other “winners” be subject to taxes? And the losers? Is it a good idea to involve SARS?
READ ALSO: MTI Bitcoin scam boss Clynton Marks skimmed R30m in two months
The simple answer is to tell Sars about your cryptocurrency winnings and losses
The simple answer is yes, says Ruan Stander, a senior cryptocurrency tax accountant at Tax Consulting SA.
“SARS clearly states that all South African residents who own cryptocurrencies must disclose their cryptocurrency holdings to SARS, regardless of whether you are a“ winner ”or a“ loser. ”This means that all investors who have participated in MTI, for example, they must make their position on SARS public ”.
Investors who have lost their cryptocurrencies can claim their cryptocurrency losses against future profits, but those who have withdrawn more than they invested will ultimately be subject to tax payments on their profits. Stander says the challenge for MTI investors, at least for those who have lost, is the proof they need to prove it at SARS.
“We would like to remind consumers that failure to disclose any cryptocurrencies to SARS is a clear violation of South African tax law and could be subject to a fine of up to 200% of the default value. Two wrongs do not make a right and neither SARS nor the law cares about what is right in relation to revenue collection. “
Stander explains that claiming a loss may be the most useful measure to obtain a preferable tax rate when it comes to cryptocurrency transactions, but a deep understanding of the applicable laws is needed, especially now that Sars has begun scrutinizing cryptocurrency tax returns. .
“Simply put, you can’t choose whether to disclose your cryptocurrency profits or losses to SARS. If you decide it’s not SARS business and SARS can’t find you, it’s nothing less than a criminal offense. There are no statute of limitations for SARS audits, which means you’ll always have to watch your back. If you have tax liability, you are a tax evader ”.
READ ALSO: The liquidators of Mirror Trading International are claiming R4.6 billion from 18 minds
What happens if you choose not to tell SARS?
According to Stander, the practice has seen many taxpayers refuse to disclose their gains or losses to SARS and therefore Tax Consulting SA had to refuse the service, as it is a criminal offense and the captured consumers will be penalized by SARS and prosecuted by the National Prosecutor’s Office. .
He confirms that SARS has been actively testing this area this year and warns that SARS is getting sharper and faster.
“This is an encouraging development and we are confident that increased compliance will ultimately lead to a smoother process for tax reporting with more favorable treatment in the future.”
Stander says approaching SARS before it takes the first step or starts asking questions gives taxpayers a “first mover advantage,” but once SARS notifies you of an upcoming audit, you can only fulfill and you may be subject to criminal penalties, as no amnesty is available at that stage.
READ ALSO: Request to declare Mirror Trading International postponed
Watch out for bad advice on taxes and cryptocurrencies
Just as bad advice got consumers involved in crypto scams in the first place, bad advice about cryptocurrencies can get them into even more trouble.
“Bad advice from some who may have a strong opinion on how cryptocurrencies should be taxed, but absolutely no real experience could get consumers into hot water.”
Some of these consultants will say that you only have to pay capital gains tax and not income tax, or that no tax applies. Stander says these tax advisors are negligent and should be reported to the various regulatory bodies you belong to.
He refers to the timeless trend that many taxpayers will follow the advice of someone who gives pleasant answers, as no one likes a “downer,” but points out that taxes in South Africa are not about convenience, nor do they care about the taxpayer’s feelings.
If things go wrong, SARS will not persecute the advisor as it is a matter between SARS and the taxpayer.
“When seeking advice on your tax obligations, it is vital that you speak to a consultant with a full understanding of crypto assets, how they operate and the transactions that take place, as well as the actual tax implications that come with them.”
