The future of IT & AI

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 In the not-so-distant future, the world of IT will have undergone a seismic shift. Gone were the days of traditional employment, where companies hires full-time employees to fill specific roles. Instead, the gig economy had taken over, and IT professionals will be embracing the freedom and flexibility that cames with freelancing. Companies had caught on to the benefits of project-based hiring, where they could tap into a global talent pool and scale up or down as needed. Job postings  floated online, and skilled freelancers would bid on projects that matches their expertise. Seasoned IT professionals, making the transition to freelancing in these  years, builds reputations on these  platforms like Toptal and Upwork, and their calendars will always be filled with exciting projects. Skilled  IT engineers helps big compernies to launch their new products. Their projects, some  complex, with tight deadlines, and the clients willing to pay top dollar for the ri...

SARS is coming after these 3 tax streams

 

Along with the rest of the world, South Africans have shown an appetite for cryptocurrencies. While the size of the market remains unclear, Coinmarketcap gives a figure of $210 billion for the global market, and approximately R6.5 billion for the South African market.

While the true figures remain a mystery, what is certain is that the South African Revenue Service (SARS) has cryptocurrency trading very much in its sights, said Thomas Lobban, legal manager, cross-border taxation at Tax Consulting South Africa.

“Bitcoin and other cryptocurrencies have notched up huge gains in past year and more—Bitcoin gained approximately 224% in 2020, for example. Given these returns, it’s unsurprising that South Africans are looking at crypto as an investment opportunity, but few realise the tax implications of such a move,” Lobban said.

“As with any other asset class, investors must understand their tax obligations in relation to their crypto investments, and plan accordingly. If they do not, the chances are they could find themselves facing an unwelcome tax bill down the line.”

SARS’s interest in the possible tax revenues to be gained from cryptocurrency have certainly been strengthened by this year’s budget, in which minister Tito Mboweni raised the budget allocation to SARS for the year by R3 billion.

High-net-worth individuals, offshore investors and cryptocurrency investors have explicitly been targeted as areas likely to yield much of the extra tax sought to be collected by SARS off the back of this additional budget allocation.

However, many taxpayers are oblivious of the fact that trading in cryptocurrency renders them liable for tax or how and when tax is levied on their cryptocurrency gains made.

Depending on how and why the trades are conducted, some crypto transactions could be deemed to be capital in nature and thus liable only for capital gains tax—however, other transactions could be deemed to be revenue-earning in nature, and would thus be taxed according to the taxpayer’s normal tax rate as per the tax tables.

“Based on our work with clients, it’s clear that a major misconception is that a ‘tax event’ only occurs when the cryptocurrency is withdrawn and converted into legal tender, but that’s not true. If a trade is made between, say, Bitcoin and Ethereum, the notional profits of that transaction would also be taxable,” Lobban said.

“While there is as yet no legislation forcing cryptocurrency platforms to report on their clients outside of the general provisions of the relevant tax Acts, such as financial service providers are required to do, the walls are closing in fast.”

SARS has already begun asking for information on crypto transactions on audit letters issued to taxpayers, and this means that non-compliant taxpayers will either have to lie (and risk incurring further penalties and back tax later) or reveal their trading history. Not providing accurate answers constitutes a criminal offence, Lobban added.

In addition, SARS is investing heavily in its IT capabilities which will enable it to analyse financial and transaction data more effectively, and identify transactions in and out of crypto platforms. Using foreign bank accounts is not a solution either because South Africa is party to numerous agreements which enable automatic reporting between jurisdictions.

“We all create digital tracks in our online activity, and there is really no place to hide, and SARS is definitely adopting a zero-tolerance approach to all tax evasion,”Lobban said. “However, it must also be said that paying one’s tax will not make investing in crypto unprofitable provided one plans properly.”


Read: South Africa’s updated driving laws are coming 1 July – but there are issues

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