The South African Revenue Service has warned taxpayers that they need to disclose details of their cryptocurrency transactions and investments – or else!

The tax authority said on Wednesday that it will include crypto assets in its compliance programmes in future to ensure it is collecting everything owed to it.

It is also engaging with the Financial Sector Conduct Authority regarding the provision of information on registered crypto asset service providers and is “receiving information directly from the local exchanges”.

“Importantly, it must be underscored that through multilateral agreements Sars is 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, which will “catalyse the cross-jurisdictional exchange of such information in respect of South African taxpayers”.

“Sars believes that most taxpayers and traders are honest and that they expect to be assisted to fulfil their legal obligations. Pursuant to our legal mandate, Sars provides certainty and clarity about all legal obligations for taxpayers and traders,” the tax authority said in a statement.

“Sars is also working assiduously to make it easy and simple for taxpayers and traders to seamlessly comply with their obligations. 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.”

Audit teams

As a result, Sars is expanding the capacity of its audit teams to support enforcement of crypto investments and profits. “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,” it said. “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.”

Sars said its voluntary disclosure programme will help those invested in crypto assets become fully compliant. But this “opportunity” has “strict conditions”, one of which is that taxpayers must approach Sars first. “Once SARS has identified the taxpayer for audit, they are precluded from applying for the VDP.”

It’s not surprising that Sars is keen to extract its pound of flesh from crypto: by its own estimates, more than 5.8 million South Africans hold a crypto asset.

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“Sars is concerned that these crypto assets and trades are not being declared on the tax returns of taxpayers. It is legally obligated to account for any income or assets held by taxpayers and had 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 be including crypto assets into its compliance programmes,” it said. – © 2024 NewsCentral Media