South African Cryptocurrency Regulators Use AI to Ensure Tax Compliance

The South African Revenue Service (SARS) and the South African Reserve Bank (SARB) have have stepped up efforts to ensure compliance with tax regulations regarding cryptocurrencies.

SARS has strict tax rules regarding cryptocurrencies. Investors could be taxed at up to 45% on their cryptocurrencies.

African law firm Webber Wentzel suggests that SARS uses artificial intelligence (AI) to combat non-compliance with tax regulations regarding cryptocurrencies.

Cryptocurrency investors can also use AI to their advantage, using tools like CryptoTaxCalculator to comply with regulatory provisions.

SARS has tightened control over cryptocurrency tradingissuing tax notices and improving regulations.

The South African Revenue Service works closely with the SARB and international exchanges to prevent tax evasion AND explain its cryptocurrency regulations.

According to African law firm Webber Wentzel, SARS is likely using AI to detect cryptocurrency traders who break the rules. But it’s not just regulators who can use AI to their advantage.

But what does this mean for crypto-loving South Africans and businesses? And how can AI help? Let’s find out.

South African cryptocurrency holders could face 45% tax

Under the South African Income Tax Act, cryptocurrencies are financial assets. They are subject to several tax regulations: income tax, capital gains tax and value added tax (VAT).

In November last year, South Africa joined 46 other countries in adopting Crypto Asset Reporting Framework (CARF)which regulates the reporting of cryptocurrency transactions.

Although most countries will not fully implement the CARF framework by 2027. (bound by domestic law procedures) SARS is actively issuing tax notices and improving domestic cryptocurrency regulations to ensure compliance.

Here are some of the SARS requirements that South African traders should follow:

All types of cryptocurrency transactions (sales, exchanges, withdrawals) qualify as taxable events.

Both profits and losses earned from cryptocurrencies are subject to taxation.

Cryptocurrency transactions of individuals can be taxed at a rate of up to 45%, while for companies it can be 27% (depending on income bracket)

Traders must demonstrate that their cryptocurrency investments are long-term investments and not short-term ones.

In addition, the SARB recently announced the Currency and Exchange Manual for Authorized Dealers and the Exchange Manual for Authorized Dealers we do not accept cross-border or currency transfers to purchase cryptocurrencies.

However, the SARB allows South African citizens to use either a one-off discretionary limit (which cumulatively caps at R1 million per calendar year) or a foreign capital limit to purchase crypto assets.

Law firm suggests SARS uses artificial intelligence

In the first quarter of 2024, Webber Wentzel suggested that South Africa experimenting with AI and machine learning to improve its fintech landscape through regulatory changes.

Just a few days ago (September 5) a law firm suggested that SARS uses artificial intelligence to address and resolve non-compliance issues.

This innovative approach reflects SARS’ commitment to modernising law enforcement mechanisms to address the complexities of digital asset trading.Webber Wentzel

Verdict – AI Tools Can Help Cryptocurrency Compliance

South African regulators are putting pressure on tax defaulters. And they’re using AI to help.

As rules become stricter and oversight increases, South African individuals and businesses should be aware of their tax obligations related to cryptocurrencies in order to avoid crimes and penalties.

But it’s not just South African cryptocurrency regulators who can benefit from AI. Investors can also use AI-powered tools like CryptoTaxCalculator (the official tax partner of MetaMask and Coinbase), which faces of cryptocurrency investors taxes to ensure compliance.

As artificial intelligence develops and grows, its importance not only in legislation but also financial inclusion through data analytics becomes more and more clear.

References

Click to expand and view sources

Reservation: The opinions expressed in this article do not constitute financial advice. We encourage readers to conduct their own research and determine their own risk tolerance before making any financial decisions. Cryptocurrency is a highly volatile, high-risk asset class.

Our editorial process

Tech Report’s editorial policy is focused on providing helpful, accurate content that offers real value to our readers. We only work with experienced writers who have specialist knowledge of the topics they cover, including the latest developments in technology, online privacy, cryptocurrencies, software and more. Our editorial policy ensures that each topic is researched and edited by our in-house editors. We maintain rigorous journalistic standards, and every article is written by 100% real authors.