2) If all divi TUSD is converted to BTC, and only tax portion of BTC is converted to ZAR, and the remaining BTC is later sold for ZAR, would that constitute a CGT event?
3) And what if the divi was paid in BTC, and non-tax portion later converted to ZAR, would that incur further taxes?
4) Another question is how to declare Foreign Dividends received, given the conversion/tx fees to get the Foreign Dividends Tax amount to ZAR?
5) Also, at what point would the Revenue Service audit the original source of the funds invested in this foreign security?
What irks me is that if the Crypto Hedge Fund turns out to be a scam, then the Revenue Service got its share of profits without rendering any service or infrastructure to protect or facilitate the investment. Taking the capital loss for the tax year does not compensate nearly enough.
Couple of points.
2/3 SARS is of the opinion that each disposal of crypto (whether sold for ZAR or any other asset such as another crypto currency) constitutes a disposal for CGT purposes at the time of disposal. (and not when its finally converted to ZAR). I agree with this opinion.
4. I'm unfamiliar of the nature of the TUSD/Crypto Hedge fund. So I'll prefer not to give an opinion on this, other than note that foreign dividends would normally result in the dividend being taxed at a. maximum effective rate of 20% in South Africa. Whether the fund would meet this definition is debatable (alternative is to be taxed at normal rates). Either way, the "dividend" should be translated at either the spot rate or the average rate for the year and included in your taxable income in the appropriate manner.
5. Interesting question. SARS effectively operates on a self assessment basis. I.e. what you submit is what you get assessed (automatically) for. There risk engine would normally dictate whether you get flagged for an audit or not. E.g. abnormal expense claims, large refunds, unmatched IRP5 income or any other risk indicators might flag you for an audit. The risk in the hypothetical scenario that you depict would typically be flagged due to an inexplicable increase in your assets/capital base, which if you're submitting a balance sheet (not all taxpayers are required to submit a balance sheet), might trigger the risk assessment on submission of the return. Alternatively, if you had to buy a property cash, this might flag something at that point in time (also note that SARS use of data is improving, and will continue to improve, as the amount of data it can collect and process improves).
Putting aside the moral side of things. Residence based taxation is a worldwide principle adopted in multiple countries, with the view that a residence are taxed (within limitations) on there world wide income - irrespective of whether the taxing country provides the "infrastructure" etc.
As a aside - I do think Crypto is going to provide some interesting case studies in the years to follow - as for example, you and many others have assumed that any gain's from crypto are capital gains...... this is not necessarily the case - as its arguable that if the only way you can realize the investment in crypto is via selling at a later stage you clearly have a profit making intention and thus the gain would be revenue and not capital. (Kruger rands have a interesting case law in this regard).
