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October 10, 2024The South African Revenue Service (SARS) is urging taxpayers who hold digital currencies, including crypto assets, to declare them through its Voluntary Disclosure Programme (VDP) in order to facilitate compliance with tax laws. This call comes as SARS has observed a significant increase in the use of digital currencies by South Africans, with more than 5.8 million individuals reportedly owning crypto assets. The region also has one of the largest uptakes of Bitcoin globally.
SARS Commissioner Edward Kieswetter reminded taxpayers of their obligation to declare all income, emphasizing the importance of honesty in fulfilling legal requirements. “SARS has been working tirelessly to ensure compliance by all taxpayers, and those who evade this responsibility increase the burden for those who comply,” Kieswetter stated. He also highlighted that non-compliance negatively impacts society, particularly the vulnerable, by reducing the state’s capacity to provide social services such as grants.
The Commissioner also warned that SARS has enhanced its technological capabilities, making it easier to identify non-compliant taxpayers. “Technology has improved our ability to track those who evade their duties, and SARS will pursue all offenders without fear, favour, or prejudice,” Kieswetter added.
In line with this, SARS is legally obligated to account for any income or assets held by taxpayers. The revenue authority had previously invited crypto exchanges and individuals involved in trading or holding digital currencies to voluntarily disclose their activities. As part of its ongoing efforts, SARS has now included crypto assets in its compliance programs, working closely with the Financial Sector Conduct Authority (FSCA) to gather information on registered Crypto Asset Service Providers (CASPs). SARS is also receiving data from local crypto exchanges and has agreements in place to exchange information with tax authorities worldwide.
A new multilateral agreement, set to be signed in November 2024 by finance ministers, will allow for the cross-border exchange of information regarding offshore crypto accounts of South African taxpayers. SARS believes most taxpayers and traders aim to comply with the law and should be supported in fulfilling their obligations.
However, the agency is equally focused on making non-compliance difficult and costly. To this end, SARS has increased its audit capabilities by incorporating artificial intelligence, machine learning, and advanced algorithms to process information on crypto asset transactions.
Recently, SARS issued query letters to taxpayers holding crypto assets, seeking detailed information about their investments and trades. These inquiries aim to assess the extent of taxpayers’ compliance in relation to crypto assets.
SARS also warned taxpayers that the VDP has strict conditions. A key requirement is that taxpayers must approach SARS voluntarily before being identified for an audit. Once a taxpayer is selected for an audit, they are disqualified from applying for the VDP.
This proactive approach by SARS signals a strong focus on ensuring transparency and tax compliance within the rapidly growing crypto market.