When a taxpayer information a tax return, SARS might ship a request for verification or “audit request” wherein it seeks clarification and/or supporting documentation from a taxpayer.
The knowledge sought by SARS is inevitably linked to the disclosures made by the taxpayer in that return. This can be a preliminary step taken by SARS in audit proceedings, and it’s essential that taxpayers put together themselves accordingly for this forward of time.
Specialist agency Tax Consulting South Africa says it has not too long ago been approached by taxpayers who had been introduced with a SARS audit request. These requests posed customary questions as could be anticipated on the taxpayers’ returns, but additionally went additional to request the next:
- The aim for which the taxpayers bought cryptocurrency; and
- A letter from the buying and selling platform(s) confirming the investments and the related buying and selling schedules for the interval and financial institution statements.
“This is able to have been moderately anticipated by the taxpayers, if they’d made any disclosure of cryptocurrency-linked buying and selling quantities of their returns, together with the rental quantities and sure investments that had been certainly disclosed to SARS.
“Nonetheless, on this case, we had explicitly confirmed that the taxpayers had not, to their information, ever effected a cryptocurrency-related transaction,” stated Thomas Lobban, authorized supervisor for Cross-Border Taxation at Tax Consulting SA.
Whereas that is definitely a primary, it’s definitely the sort of method by SARS that taxpayers ought to anticipate shifting ahead, Lobban stated.
Enjoying by the foundations
Lobban stated that taxpayers ought to already know that it’s a felony offence for a taxpayer to wilfully fail to submit a doc or data as requested by SARS, or make a false assertion to SARS.
It’s not materials whether or not the taxpayer involved had justification for such non-disclosure or false assertion made, he stated.
“Because of this a taxpayer who fails to appropriately disclose their cryptocurrency-related revenue or adjust to an audit request by SARS to this impact could also be convicted for an offence and be liable to a wonderful or imprisonment for as much as two years.
“In gentle of this current change to our tax legal guidelines, it’s possible to know that SARS is within the means of ensnaring culpable taxpayers who haven’t disclosed their cryptocurrency-related buying and selling earnings and/or losses.”
Whereas additional cryptocurrency regulation is definitely on its manner, and with the worldwide Frequent Reporting Requirements now in full swing, Lobban stated that audit requests are nonetheless a main weapon in SARS’ arsenal and the partitions are closing in on non-compliant cryptocurrency merchants.
So, when is SARS disclosure required?
A false impression usually harboured by taxpayers is that they don’t owe any tax legal responsibility on their cryptocurrency-related revenue and don’t have to make any disclosure to SARS to this impact.
That is, sadly, not the case, stated Lobban.
“From the outset, it must be recognized that all cryptocurrency transactions will carry tax penalties for a taxpayer.
“A tax disclosure obligation doesn’t solely come up the place a money steadiness is withdrawn from a buying and selling platform – all transactions which have been made (whether or not a transaction of cryptocurrency for cash or cryptocurrency for different cryptocurrency) should be disclosed to SARS.”
Taxpayers ought to take the time to contemplate and perceive the tax penalties when coping with cryptocurrency, to stop being caught off guard upon a SARS inquiry to this impact, he stated.
“Any taxpayer who has not disclosed cryptocurrency held or traded ought to instantly search skilled steerage in getting their tax affairs so as. Alternatively, the place you’ve by no means purchased or bought cryptocurrency beforehand, it is very important proceed with warning when responding to an audit request.”
Lobban stated that SARS is nicely inside its rights to compel a taxpayer to answer an audit request. Failing to reveal any related quantities or reply to an audit request appropriately may nicely lead to substantial penalties or harsh felony sanctions.
“There may be little doubt that SARS is pursuing non-compliant cryptocurrency merchants, so it’s best for these taxpayers to remain forward of the curve and make sure that their tax affairs so as beforehand.”