The South African Revenue Service (SARS) has now apparently blocked an avenue that many crypto traders have relied on to profit from arbitrage transactions.
The country’s online tax reporting system has allowed crypto-arbitrage traders to make multiple purchases on overseas cryptocurrency platforms using a single approval.
Now traders will need approval for every trade they are looking for.
SEE ALSO: South African Revenue Service (SARS) Reportedly Requests Disclosures of Crypto Trading Activities Among Taxpayers
Arbitrage is a practice where traders seek to profit from differences in the price of an asset on different exchanges. Each South African taxpayer is entitled to a Special Discretionary Allowance (SDA) of R 1 million per year and a Foreign Investment Allowance (FIA) of R 10 million per year, which they can invest outside the country.
As such, South Africans use their allowances to buy crypto assets on foreign exchanges before transferring the funds to local exchanges to sell them at higher prices.
It is reported that asset price differences have ranged between 0 and 3% in recent months.
The old online tax filing system made it easier to transfer funds to foreign exchanges and return locally. No permission is required to use the SDA, but South Africans who use the FIA need tax clearance. Most crypto-arbitrage transactions are done in batches of R 100,000 or 200,000, which requires multiple approvals from SARS.
Until recently, these approvals could be obtained by going online and pressing a PIN code “Refresh” button on the SARS website once the initial FIA approval had been granted. SARS would issue a new PIN each time an approval was requested.
However, SARS recently updated its e-filing system, so whenever the “Refresh” button is pressed, the PIN code remains unchanged. Now a new approval process is required for a single trade someone wants to make.
Crypto exchange, VALR, says this means local banks now have no way of differentiating between old and updated PINs that are “generated to send the same capital originally requested in an AIF request. to an international beneficiary “.
VALR, which launched an arbitration negotiation desk in January 2021, adds:
“The implication of this is that updated FIA pins will not be accepted as valid PINs for arbitration purposes and a whole new AIF request will have to be made in order to conduct further arbitration transactions under AIF once that the original FIA pin will be exhausted. . “
Jon Ovadia, CEO of South Africa’s leading cryptocurrency broker OVEX, however, says the change to SARS’s online filing system adds delays, but does not diminish the opportunity for crypto arbitrage.
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