The South African Revenue Service (SARS) is intensifying its efforts to identify taxpayers who have failed to declare income from crypto assets, as the number of South Africans engaging in digital currencies continues to grow. With over 5.8 million citizens holding crypto assets, SARS is determined to ensure that all income from these investments is properly declared on tax returns.
SARS Commissioner Edward Kieswetter highlighted the agency’s concerns regarding the non-disclosure of crypto assets and trades. “It is our strategic objective to make it hard and costly for those who are wilfully noncompliant,” Kieswetter said, underscoring SARS’ commitment to fostering a culture of voluntary compliance among taxpayers.
The agency has seen a significant increase in the use of digital currencies, with crypto assets emerging as one of the most prominent forms of investment in the country. SARS is now broadening its compliance programmes to include crypto assets, a move that will see the tax authority collaborate more closely with other regulatory bodies.
In a significant step forward, SARS has engaged with the Financial Sector Conduct Authority (FSCA) to gather information on registered Crypto Asset Service Providers. Under FSCA regulations, crypto asset dealers must register with the authority and are subject to regulatory oversight.
SARS has also begun receiving data directly from local crypto exchanges, enabling the agency to cross-reference taxpayer information. This effort is bolstered by global cooperation, as SARS exchanges data with tax authorities worldwide through multilateral agreements. A new agreement set to be signed by finance ministers next month will further facilitate the sharing of information regarding South African taxpayers with offshore crypto accounts.
Despite these measures, SARS expressed confidence that most taxpayers and crypto traders are honest in their financial dealings. The agency offers a voluntary disclosure programme for those who may have overlooked their crypto asset obligations, provided they approach SARS before being selected for an audit.
“It is our objective to provide certainty and clarity about legal obligations for taxpayers while making it easy and simple for them to comply,” Kieswetter said. He emphasized that SARS is committed to supporting taxpayers in fulfilling their responsibilities, but warned that once an individual has been flagged for audit, they are no longer eligible for the voluntary disclosure programme.
In its bid to enforce compliance, SARS has ramped up the capabilities of its audit teams and increasingly relies on artificial intelligence, machine learning, and advanced algorithms to process tax data. Recently, the agency issued query letters to taxpayers holding crypto assets, aiming to gain insight into their investments and trades.
These letters are part of a broader initiative to ensure that taxpayers meet their legal obligations. Kieswetter reiterated that SARS is dedicated to making noncompliance a costly affair for those who attempt to evade their tax responsibilities. The tax authority remains vigilant in its pursuit of those who fail to disclose their crypto holdings, leveraging cutting-edge technology and international cooperation to close any loopholes in the system.
As the popularity of digital currencies continues to rise, SARS’ efforts to regulate the sector highlight the increasing scrutiny on crypto asset transactions, with noncompliance carrying severe consequences for those who attempt to avoid their tax duties.