The South African Revenue Service (SARS) has announced plans to enforce tax compliance on crypto assets, a move that signals the growing regulatory focus on digital currencies.
Reports reveal that the tax authority now mandates taxpayers to declare their crypto holdings, aiming to ensure proper taxation on their assets.
SARS is tasked with collecting all revenues due to the government, ensuring compliance with tax and customs laws, and facilitating legitimate trade through customs services. While over 5.8 million South Africans hold crypto assets, SARS is concerned that these crypto assets and trades are not being declared on the tax returns of taxpayers.
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However, The South African Revenue Service believes that most taxpayers and traders are honest and that they expect to be assisted in fulfilling their legal obligations. Pursuant to its legal mandate, SARS provides certainty and clarity about all legal obligations for taxpayers and traders. It is also working assiduously to make it easy and simple for taxpayers and traders to seamlessly comply with their obligations.
Also, the tax authority is collaborating with the Financial Sector Conduct Authority (FSCA) to gather information from registered crypto asset service providers, alongside receiving data directly from local exchanges.
SARS Commissioner Edward Kieswetter emphasized the need for taxpayers to honestly and dutifully honor their legal obligations by declaring all their income.
He said,
“SARS has been working ceaselessly to ensure compliance by all taxpayers, and those who are evading their responsibility make the burden of compliance difficult for compliant taxpayers. This is not only unfair to honest taxpayers but affects the vulnerable in society disproportionately by limiting the state’s ability to deliver social grants and other much needed social benefits.”
To address this, SARS is encouraging South Africans to voluntarily declare their crypto assets while warning that it will take decisive action against those who remain non-compliant. “Technology has enhanced SARS’ ability to root out non-compliant taxpayers, and we will pursue all without fear, favor, or prejudice”, Kieswetter added.
SARS is also exchanging information with other global tax authorities through multilateral agreements, further strengthening its compliance efforts. The tax authority is expanding its audit teams and incorporating artificial intelligence, machine learning, and algorithms to bolster enforcement initiatives.
Recently, SARS sent query letters to taxpayers with crypto holdings to better understand their investments and trading activities and assess their compliance status. With these steps, the South African Revenue Service mirrors the Federal Inland Revenue Service (FIRS) of Nigeria, which also recently introduced new tax laws regulating cryptocurrency.
SARS recent plan to enforce tax compliance on crypto assets is coming after the Financial Sector Conduct Authority, (FSCA), declared that crypto assets are now included under the definition of ‘financial products’ in terms of the Financial Advisory and Intermediary Services Act.