Are you making money with crypto assets? Sars is looking for you

Sars is coming after people who make money with crypto assets and hide the spoils.

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.

The South African Revenue Service (Sars) noted the phenomenal growth in many South Africans’ use of various digital currencies, with the prevalence of crypto assets as one of the most prominent.

Sars commissioner Edward Kieswetter says that Sars is concerned that taxpayers do not declare these crypto assets and trades on their tax returns.

Sars is legally obligated to account for any income or assets held by taxpayers and previously invited crypto exchanges and people who trade or hold crypto assets to disclose it voluntarily.

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FSCA will share information about crypto trades with Sars

Sars will now include crypto assets in its compliance programmes and therefore Sars is now engaging with the Financial Sector Conduct Authority (FSCA) regarding the provision of information on registered Crypto Asset Service Providers (CASPs).

Crypto asset dealers must register with the FSCA and are regulated by the authority.

In addition, Sars is receiving information directly from the local exchanges.

Sars also exchanges information with other tax authorities globally through multilateral agreements and the provision of offshore crypto accounts will be the subject of a multilateral agreement that ministers of finance will sign in November 2024.

This agreement will catalyse the cross-jurisdictional exchange of information regarding South African taxpayers’ crypto assets.

However, Sars says it believes that most taxpayers and traders are honest and that they expect assistance to fulfil their legal obligations.

As part of its legal mandate, Sars provides certainty and clarity about all legal obligations for taxpayers and traders, while working to make it easy and simple for taxpayers and traders to seamlessly comply with their obligations.

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Sars making it hard for crypto asset holders who do not comply

“Critically, it is our strategic objective to make it hard and costly for those who are wilfully non-compliant. These efforts are intended to support our strategic intent of fostering a culture of voluntary compliance.”

As a result, Sars says it is increasing the capability of its audit teams to support enforcement initiatives to address crypto compliance.

“Sars has resorted to greater use of artificial intelligence, machine learning and algorithms to process our work. In implementing our mandate, Sars recently issued query letters to taxpayers with crypto assets.”

These letters aim to gain insight into taxpayers’ investment in crypto assets and the trades undertaken, so Sars can assess taxpayers’ compliance.

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Voluntary disclosure of crypto assets, but only if Sars does not find you first

Sars says taxpayers who could potentially be affected are understandably concerned about their crypto asset compliance and therefore Sars reminds them of its Voluntary Disclosure Programme aimed at facilitating compliance.

However, this opportunity to come clean has strict conditions: taxpayers must approach Sars first.

Once Sars has identified you for audit, you cannot apply for the programme anymore.

Kieswetter says he wants to remind taxpayers to honestly and dutifully honour their legal obligations by declaring all their income.

“Sars has been working ceaselessly to ensure all taxpayers’ compliance 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.

“Everyone must know that technology has enhanced Sars’ ability to root out non-compliant taxpayers. Be warned, Sars will pursue everyone without fear, favour or prejudice.”