South African Revenue Service to include crypto assets in its tax compliance program

The South African Revenue Service (SARS) has raised concerns over deliberate tax evasion from crypto holders and traders. The nation’s tax-collecting authority noted that South African citizens are not declaring digital assets and trades when filing returns. The body also dispelled consequences for those failing to comply with digital asset tax policies.

SARS reported that a staggering 5.8 million South Africans hold a crypto asset and that the country boasts the largest uptake of Bitcoin in the world. However, the tax collector worried that most South Africans do not include digital assets when filing their returns with the authority under the SARS Voluntary Disclosure Programme (VDP) as required by law.

SARS involves third parties to help regulate crypto in South Africa

Media Release: SARS Warns About Crypto Asset Compliance

SARS has noted the phenomenal growth of the use of various digital currencies by many South Africans. Prominent amongst these is the prevalence of crypto assets… https://t.co/EXlWYlYrVA pic.twitter.com/fDbggUzSA1

— SA Revenue Service (@sarstax) October 9, 2024

SARS raised the concerns on October 9th, citing South African laws that require the body to account for all income assets, including digital currencies. In the announcement, the authority claims to have contacted crypto exchanges and those involved in trading or holding crypto assets to reveal and disclose valuable information on users for tax compliance.

SARS mentioned that it is involving other parties, such as the Financial Sector Conduct Authority (FSCA), in providing information on registered crypto asset service providers (CASPs). SARS also claims to receive information directly from local exchanges and will soon include crypto assets in its tax compliance program. 

The body also stated that it was communicating with other tax authorities worldwide to enhance multilateral agreements on offshore crypto accounts for South Africans. According to the announcement, the Minister of Finance will sign the agreements in November. 

SARS warns of a crackdown on non-compliant crypto traders and investors

The authority emphasized that the filing process will be simplified to accommodate the complying crypto taxpayers. SARS stated it would increase its audit teams to fish out non-compliant taxpayers and bring them to book.

SARS Commissioner Edward Kieswetter openly urged South African crypto enthusiasts to embrace compliance and file all their income with the authority. He also warned that the authorities will pursue those who fail to meet compliance and hold them accountable.

SARS stated it was working on introducing new technology powered by artificial intelligence and machine learning algorithms to enhance compliance. The body mentioned it had issued query letters to taxpayers involved in digital assets to get their insights on crypto investments for compliance purposes.

The FSCA declared crypto assets as financial products in 2022. The body commenced the issuance of licenses to crypto-oriented entities operating in the jurisdiction in June 2023. By July this year, the authority had received 383 license applications. The government entity has already approved 63 applications and declined 5 due to applicants failing to meet regulatory requirements.

The FSCA began cracking down on illegal, non-compliant crypto activities in efforts to manage the crypto industry. The body is currently investigating 30 cases of entities operating in South Africa without licenses or approval from the government.