SARS has a new unit coming after these taxpayers in South Africa hard

 ·4 Feb 2025

The South African Revenue Service (SARS) has established a specialised cryptocurrency unit to specifically target crypto trading and investing in the country and abroad.

The unit effectively has an unlimited purview, and SARS has confirmed its ability to receive information directly from local crypto-asset exchanges to ensure non-compliance is both hard and costly for taxpayers.

According to tax experts at Tax Consulting SA, the scope extends beyond just crypto trades. International cooperation and automatic information exchanges significantly increase the range of SARS’ non-compliance radar.

“Whether your crypto assets are held and disposed of locally or offshore, SARS’ purview on a taxpayer’s legal obligation to account for any income or assets is a global phenomenon,” they said.

The SARS crypto unit comprises highly trained professionals with very specific skills, Tax Consulting said.

The unit is empowered to open historic tax periods, and conduct in-depth audits, and is authorised to uncover non-compliance at all levels.

“This ranges from a standard verification, and in instances where taxpayers have, in fact, made a loss on their crypto activities, to extreme cases where SARS recategorizes proceeds from crypto disposals, from capital gains to income.”

The tax experts said that the recategorization powers is not common knowledge and can have a staggering impact on a tax bill.

This process could shift the tax rate from the 18% capital gains tax rate for individuals to potentially as high as 45%, depending on the individual taxpayers’ marginal tax rate.

“This recategorization can result in inflated tax liabilities for crypto holders, potentially wiping out a significant portion of their gains,” the experts said.

The real nightmare, however, lies in the burden of proof, they said.

“Taxpayers must convince SARS that their crypto holdings are capital in nature—a near-impossible task without meticulous records, legal arguments, and possibly a costly dispute with SARS.

“Without clear-cut guidelines on what constitutes, many may find themselves at the mercy of SARS’ interpretation, with little room to push back.”

SARS is coming in hard

Tax Consulting noted that SARS is already sending out Notices of Audit and Requests for Relevant Material to crypto holders.

It added that, given the unit’s extensive powers, those who hold or have ever held crypto should not assume that historical non-declaration means that SARS will not look to tax these profits in future.

“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,” they said.

Crypto traders should also not assume that notices requesting information are for data gathering—SARS already knows.

“Even though taxpayers are requested to make full disclosures to SARS on local and foreign crypto transactions, this is more for verification than data gathering purposes,” Tax Consulting said.

SARS has extended an opening for non-compliant crypto traders to engage in the Voluntary Disclosure Programme (VDP), but is likely to continue to home in on these taxpayers in the years to come.

A further warning to taxpayers is that SARS leaves very little room to hide when it comes to collecting its dues.

Recent court cases have shown that the taxman is fully empowered and capable of taking money directly from bank accounts if a tax debt is owed.

The tax laws allow SARS to instruct a bank to empty its accounts and pay a tax debt due without the account holder’s authorisation.

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