SARS issues major warning to 6 million taxpayers

The South African Revenue Service (SARS) has confirmed that it has the ability to receive information directly from local crypto asset exchanges and will be coming after the nearly 6 million South African taxpayers who hold these assets.

The revenue service on Wednesday (9 October) noted the phenomenal growth of South Africans’ use of various digital currencies, particularly the prevalence of crypto assets.

“A staggering number of more than 5.8 million South Africans hold a crypto asset, with Southern Africa boasting the largest uptake of Bitcoin in the world,” it said.

SARS said it is concerned that these crypto assets and trades are not being declared on the tax returns of taxpayers, adding that it is legally obligated to account for any income or assets held by taxpayers.

The taxman previously invited crypto exchanges and those involved in trading or holding crypto assets to disclose related activities on a voluntary basis.

As a follow-up, SARS will include crypto assets in its compliance programmes.

“Consequently, SARS is engaging with the Financial Sector Conduct Authority (FSCA) regarding the provision of information on registered Crypto Asset Service Providers (CASPs). SARS is also receiving information directly from the local exchanges,” it said.

SARS added that it is, through multilateral agreements, also exchanging information with other tax authorities globally.

“The provision of offshore crypto accounts will be the subject of a multilateral agreement to be signed by Ministers of Finance in November 2024, which will catalyse the cross-jurisdictional exchange of such information in respect of South African taxpayers,” it said.

“SARS believes that most taxpayers and traders are honest and that they expect to be assisted to fulfil their legal obligations. SARS is working assiduously to make it easy and simple for taxpayers and traders to seamlessly comply with their obligations.”

The revenue service said it is one of its key objectives “to make it hard and costly for those who are willfully non-compliant”, and so it is now increasing its audit capabilities and teams to support enforcement in this field.

“SARS has resorted to greater use of artificial intelligence, machine learning and algorithms to process our work. In implementing our mandate, SARS has recently issued query letters to taxpayers with crypto assets. These letters aim to gain an insight into taxpayers’ investment in crypto assets and the trades undertaken to enable SARS to assess taxpayers’ compliance in this regard,” it said.

Taxpayers who could potentially be affected and are understandably concerned about their crypto asset compliance are reminded of the SARS Voluntary Disclosure Programme (VDP) to facilitate compliance.

This has strict conditions, however – most notably that taxpayers must approach SARS first.

“Once SARS has identified the taxpayer for audit, they are precluded from applying for the VDP,” it said.

SARS Commissioner Edward Kieswetter said the service is coming down hard on anyone who is non-compliant.

“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.

“Let all know that technology has enhanced SARS’ ability to root out non-compliant taxpayers. Be warned, SARS will pursue all without fear, favour or prejudice,” he said.

Tax experts at Tax Consulting SA warned further that taxpayers must be aware that crypto-related activities, even though on-platform, and not realised for fiat gain, do carry with them stringent reporting requirements, including declaration and payment of taxes due on the benefits derived thereon.

“Those who hold, or have ever held, crypto, should certainly not assume that historical non-declaration means that SARS will not look to tax these profits in future,” the group said.

“Not only will a review of this historical transgressions be conducted, but should the crypto trader under the radar not comply, severe penalties, or even jail time is immediately on the cards, per section 234 of the Tax Administration Act.”

Read: SARS can come after your pension and salary in South Africa