<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
JEREMY MAGGS: Now crypto, I read, is rapidly losing one of its old attractions for taxpayers. What am I talking about? Well, the relative invisibility.<\/p>\n
From March this year, South Africa\u2019s new crypto asset reporting framework began requiring crypto service providers to collect detailed transaction information for Sars (South African Revenue Service), including purchases, disposables and wallet transfers.<\/p>\n
So I think the big question for companies is becoming less about whether Sars can see the crypto and more about whether they can justify how they have accounted for it.<\/p>\n
Joining me now is Mohammed Mayet, who is director and head of tax at HLB CBS Group South Africa. Mohammed, thank you very much indeed.<\/p>\n
Is this really then a crypto tax crackdown, or is Sars simply getting better at seeing transactions that were always taxable in the first place?<\/p>\n
MOHAMMED MAYET: Greetings to you, Jeremy, and thank you for the opportunity and greetings to your listeners.<\/p>\n
I think it\u2019s a very important question, and it\u2019s a balancing act between the Sars crackdown on crypto trades per se, together with something that has already been there for a period of time where the revenue authorities seeing that there\u2019s a potential pot of extra revenue where taxpayers in the South African context have not accounted for crypto correctly in their tax return, in whichever form or manner.<\/p>\n
So, it\u2019s a balancing act of the combination of both.<\/p>\n
JEREMY MAGGS: Is crypto becoming more widespread in terms of use in that respect, do you think?<\/p>\n
MOHAMMED MAYET: Yeah. Current data is showing approximate figures of about six million South Africans, whether taxpayers registered or not registered. But about six million South Africans playing in the crypto space.<\/p>\n
Initially, if you look at six million people playing in crypto space, one would then from a revenue authority perspective, think, okay, so are these six million people making profits, losses, are they playing offshore at other platforms around the world and, do I, as Sars get my rightful share of taxes where the taxes are due?<\/p>\n
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On that basis, yes, it is it is a broader issue to look at in terms of revenue flows to the authority, which the authority believes that there are crypto taxes that are due to us in whichever form or manner through this number of people trading in crypto throughout South Africa.<\/p>\n
JEREMY MAGGS: The framework, as I understand it, requires service providers then to report transactions to Sars. All well and good. Mohammed, how much more visibility then does Sars have than it perhaps had in the past?<\/p>\n
MOHAMMED MAYET: Historically, there was no visibility. Then obviously, the data started showing so many South Africans, as I\u2019ve mentioned, who are dealing or trading in crypto and hence the reporting framework from a SA perspective started beefing up.<\/p>\n
That means that reporting framework requires two things.<\/p>\n
The first thing it requires is reporting of certain information, data information, user information, platform information, number of trades, all these finer details are now providing the data intelligence that Sars needs and Sars would then do its own, in the second instance, its own data mining and then filter that to, by way of example, an individual\u2019s tax return or business tax return or whomever and see exactly, okay, we have a reasonable amount of data to make a determination that you have traded with crypto on these platforms.<\/p>\n
And the suggestion is that you have traded so much, where is your declaration. Have you made a profit? Have you made a loss? Whatever the case is.<\/p>\n
So the data integrity is becoming more and more of an important factor to make the determination. So it\u2019s definitely a beef up in that reporting framework.<\/p>\n
JEREMY MAGGS: So does using then an offshore exchange or even moving crypto into a private wallet still offer taxpayers any meaningful degree or form of anonymity?<\/p>\n
MOHAMMED MAYET: In general, when the platforms move, whether you move to a private wallet, whether you move offshore, there\u2019s visibility of your trading account, and each user has a unique password, an account and a summary of your trades.<\/p>\n
So let me just give you an example, if you\u2019re trading in Singapore, if you\u2019re trading in Hong Kong, if you\u2019re trading in the US, it doesn\u2019t matter, you are linked to an account.<\/p>\n
Whether that account is split into private wallets or not, you have a summary of that trade.<\/p>\n
That summary of that trade then makes the determination, amongst others, as your base of what is your activity.<\/p>\n
Those activities are again critical to the data integration process, because the more data in the reporting framework that I have from these platforms, as the revenue authority, the more I can make a better determination of exactly where you\u2019re playing, how you\u2019re playing, in which platforms are you playing domestically and cross borders.<\/p>\n
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So yeah, to answer that question, it\u2019s an integrated approach to get hold of the holistic picture of a taxpayer.<\/p>\n
JEREMY MAGGS: And in that respect, the biggest issue then would be one of classification. Why is deciding whether a gain then is capital or revenue so difficult?<\/p>\n
MOHAMMED MAYET: Historically, current and going on to the future, the capital versus revenue argument will always be there.<\/p>\n
We\u2019ve had many, many court cases in front of our courts around the capital and revenue argument, and it\u2019s an ongoing practice by Sars, by taxpayers to say, am I in the capital box or am I in the revenue box?<\/p>\n
That classification has a number of factors to determine whether you fall into the revenue box or capital box.<\/p>\n
One big differentiation I can just allude our audience to is the following \u2013 I\u2019m a doctor, I have a practice and I run my medical practice through there, but I\u2019ve decided to potentially look at crypto, and I see it gives you good returns.<\/p>\n
I want to build a small nest for my family, and I thought perhaps let me play crypto for a long-term benefit. I\u2019ll throw $1000 into it and leave it for 15 years, 10 years, five years, six years, whatever the case is, and on that basis, what is my income?<\/p>\n
My income is my practice, and this is like an investment that may materialise and give me some golden nest. So it\u2019s a more long-term approach. It\u2019s more capital in nature.<\/p>\n
Let\u2019s turn the coin the other way around, I don\u2019t have anything to do, and I sit every day of my life and I play crypto. I live off it, I pay my bills, I meet my commitments, and I do this every day, every week, every month, and that\u2019s my income. That puts you into the revenue box.<\/p>\n
This is a very simple example to have this classification and differentiation factor. It can get a bit complicated when you go into further level two, level three detail. But this gives you an indication of this argument between capital and revenue.<\/p>\n
JEREMY MAGGS: Mohammed Mayet, I\u2019m going to leave it there, director and head of tax at HLB CBS Group South Africa. Appreciate your time today, thank you.<\/p>\n
#Sars #closing #crypto #traders #tax #affairs<\/p>\n","protected":false},"excerpt":{"rendered":"
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