SARS has no idea how much Bitcoin you have

Bradley Prior

Bradley Prior

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SARS has no idea how much Bitcoin you have

Many South Africans who have invested in Bitcoin are unsure whether SARS can monitor their cryptocurrency balances.

It is a legal requirement to pay tax on your Bitcoin earnings, although this may prove difficult to enforce, as it is logistically challenging for SARS to monitor transactions and balances for South Africans by inspecting the blockchain.
 
You had them both on the line, any reason you didn't ask if they declare other info to SARS - like how much ZAR people are putting in & cashing out? That SARS doesn't know how much crypto someone has is kinda obvious, but whether these exchanges are providing SARS with other info is still not clear.
 
SARS has no idea what is happening, they are just preparing for the 6th revolution
 
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To be fair, with the volatility of all crypto-currencies, you really have no "value" until you actually convert them to goods or local currency. At which point SARS may well have the right to extract their pound of flesh.
For example, say you buy R1mil bitcoin - now at end of first year it's valued at say R2mil. At end of 2nd year it's valued at R200k because it crashed. Now is it fair to pay tax on the R1mil "profit" you made at end year 1 - will they pay you back for your R800k loss at the end of 2nd year. I think not.
 
Pythonista said:
To be fair, with the volatility of all crypto-currencies, you really have no "value" until you actually convert them to goods or local currency. At which point SARS may well have the right to extract their pound of flesh.
For example, say you buy R1mil bitcoin - now at end of first year it's valued at say R2mil. At end of 2nd year it's valued at R200k because it crashed. Now is it fair to pay tax on the R1mil "profit" you made at end year 1 - will they pay you back for your R800k loss at the end of 2nd year. I think not.
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Well you don't until you cash out or trade. The issue is that it's so volatile that one year you may make R1m and the next you may lose R500k. This R500k is only offset against the current year's income. That's what's so unfair as Sars will take their pound of flesh but aren't prepared to take on any risk. I say our laws should change so they are liable for both.

Really in today's world income tax is no longer relevant. We should scrap all taxes and only charge vat so you only pay tax when actually use your money.
 
You're supposed to supply this information as part of your assets/liabilities when doing your tax return. If you don't, you'll probably end up paying income tax when you sell (as opposed to capital gains at a much lower rate).
 
Well Sars might not know now, but the bitcoin blockchain is never discarded so once they make the link they can go all the way back. I am not sure why so many people believe bitcoin is anonymous because the history is stored forever and is public and digital - graph databases and algorithms will crunch through multiple layers of obfuscation unless you split your exits which will get more and more difficult. It is a lot easier to look at the blockchain than to get warrants in different legal jurisdictions and getting minimal information on paper like money laundering is done today.

I don't think tax is the biggest headache for the government.. using bitcoin to circumvent exchange control is.
 
Even if they did know how much Bitcoin you have, what's the legality of taxing something not involving fiat or currency not recognized by the state or not even regarded as legal tender?

Do we tax trading cows for sheep for instance? And how?
 
iu
 
Pythonista said:
To be fair, with the volatility of all crypto-currencies, you really have no "value" until you actually convert them to goods or local currency. At which point SARS may well have the right to extract their pound of flesh.
For example, say you buy R1mil bitcoin - now at end of first year it's valued at say R2mil. At end of 2nd year it's valued at R200k because it crashed. Now is it fair to pay tax on the R1mil "profit" you made at end year 1 - will they pay you back for your R800k loss at the end of 2nd year. I think not.
Click to expand...
The real b.s part is capital gains tax in the first place, as it is essentially a tax on inflation. Inflation caused by the reserve bank and the government. Part of the reason why people make good money on crypto is because it is fixed, whilst the governments keep pressing the "print more money" button.

Central banks could end cryptocurrency overnight if they made their currencies behave like a store of value.
1) You can't print more money, the total amount of money is capped at X.
2) You can transfer as much or as little of that money as you want to, to whomever you want to.
 
Johand said:
I don't think tax is the biggest headache for the government.. using bitcoin to circumvent exchange control is.
Click to expand...

Moving substantial amounts of money using crypto is not as easy as it sounds. As soon as you try deposit the proceeds of sale of crypto into a bank account, KYC/AML processes kick in, followed by reporting to tax authorities who share information among themselves (AEOI).

IRS/HMRC have already started cracking down on tax evasion by forcing exchanges to supply customer information and wallet addresses. I'd rather just pay the tax and sleep easier.
 
Bobbin said:
Even if they did know how much Bitcoin you have, what's the legality of taxing something not involving fiat or currency not recognized by the state or not even regarded as legal tender?

Do we tax trading cows for sheep for instance? And how?
Click to expand...

Yes. Barter transactions are taxed and there are rules around it. Swapping cows don't tend to be a big problem because most people swapping cows tend to fall below the income tax thresholds, but in theory you need to pay tax. Bigger barter transactions ended up in court.
 
garp said:
Not to be pedantic, but I don't believe this is true. It is a requirement to pay tax on your Rand earnings, when you sell Bitcoin, not your Bitcoin earnings.
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Technically you pay tax on all earnings whether it's goods or currency. If you receive room and board you're supposed to convert that to a market related Rand value and pay tax on it. Most people don't and it's hard to enforce but Sars makes sure to have rules in place that even if you live without money you need to pay tax. So even if you don't declare that 1BTC you got from somewhere you might have problems when selling it and not being able to explain how you bought it.
 
Johand said:
Well Sars might not know now, but the bitcoin blockchain is never discarded so once they make the link they can go all the way back. I am not sure why so many people believe bitcoin is anonymous because the history is stored forever and is public and digital - graph databases and algorithms will crunch through multiple layers of obfuscation unless you split your exits which will get more and more difficult. It is a lot easier to look at the blockchain than to get warrants in different legal jurisdictions and getting minimal information on paper like money laundering is done today.

I don't think tax is the biggest headache for the government.. using bitcoin to circumvent exchange control is.
Click to expand...

The blockchain contains a list of bitcoin addresses only. And that can be generated on the fly and then used once only. While the history is stored permanently, there is no easy way to link your address to you, unless you use a public exchange (like Luno) where your details are linked to it.

If you keep it in a client on your desktop only, then only an analysis of your computer will reveal this. Of course, you also run the risk of loss - since there's nothing officially that links it to you, if you lose access to your wallet you lose access to the contents and no one else can help you.
 
Valerion said:
If you keep it in a client on your desktop only, then only an analysis of your computer will reveal this. Of course, you also run the risk of loss - since there's nothing officially that links it to you, if you lose access to your wallet you lose access to the contents and no one else can help you.
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Keeping it off an exchange is much safer. And if you store your wallet key somewhere safely (in writing) you can happily erase your desktop wallet completely.
 
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