SARS doesn’t know how much Bitcoin you own

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.

Not only would this require SARS to trace cryptocurrency transactions using a blockchain explorer, but the revenue service would also need to link your identity to a specific Bitcoin address before even beginning this inspection.

Obviously, this becomes a lot easier to monitor if South Africans withdraw their earnings from an exchange and deposit them into their bank account.

However, if you keep your Bitcoin on the blockchain and do not convert it to fiat, the only way SARS could link your identity to your Bitcoin holdings would be to ask the exchange you used to buy your cryptocurrency for your Bitcoin address.

To provide additional clarity on this topic, we asked major local cryptocurrency exchanges Luno and VALR whether they provide SARS with the Bitcoin addresses of their users.


Luno

Luno Africa general manager Marius Reitz told MyBroadband that Luno will share customer details under certain conditions.

“As set out in our Privacy Policy, Luno will share customer data with law enforcement or other authorities where doing so is necessary to comply with a valid request made by that authority,” Reitz said.

He added that to date, Luno has not supplied SARS with the Bitcoin address for any of its customers.

If Luno was asked by SARS to divulge a user’s Bitcoin address and it was bound to do so, the terms of request would determine whether the user was informed.

“Whether or not a Luno customer is informed when their data is shared with law enforcement or other authorities will depend on the terms of the request and any instructions given to Luno by the relevant authority.”

Essentially, while Luno has not provided a customer’s Bitcoin address to SARS, it will do so if it is required to according to local laws and regulations.

Luno Ethereum app


VALR

VALR co-founder and CPO Badi Sudhakaran also said that it has not provided SARS with the Bitcoin address of any of its users.

“Under the current regulatory framework, our understanding is that there is no requirement to do so,” he said.

“However, we are vigilant towards any and all developments and changes to the framework. We aim to always keep our customers and VALR on the right side of the law.”

Sudhakaran added that customers should consult a tax professional for advice on declaring their cryptocurrency transactions.

“Currently VALR is not required to disclose Bitcoin addresses or customer trading activity to SARS and we have not done so in the past.”

“We treat our customers’ data and information just as we want our own data and information to be treated,” he said.

The responses above mean that if you have purchased cryptocurrency through VALR or Luno, SARS does not know how much Bitcoin you currently have, and these exchanges are not technically required to divulge this information.

This could change as local regulation around cryptocurrency evolves, and it is important to note that South Africans are required to pay tax on their cryptocurrency earnings – whether it is capital gains tax or income tax.

VALR BTCZAR trading image


Now read: How to stay safe when buying Bitcoin in South Africa

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SARS doesn’t know how much Bitcoin you own