The days of quietly holding onto your crypto assets without reporting them to the tax authorities are nearing an end as the South African Revenue Service SARS announced that crypto assets will be included in its compliance programs.
This move comes as no surprise, given the surge in digital currency use, with over 5.8 million South Africans-roughly 10 of the population-now holding some form of cryptocurrency. Southern Africa, in fact, boasts one of the highest uptakes of Bitcoin in the world.
SARS has raised concerns that many taxpayers are failing to declare their crypto assets in their tax returns, despite being legally required to report all forms of income and assets. In response, the tax authority has partnered with the Financial Sector Conduct Authority FSCA and is working with local crypto exchanges to collect information on crypto assets.
This collaboration is part of a broader initiative to ensure tax compliance by monitoring registered Crypto Asset Service Providers CASPs.
To further tackle non-compliance, SARS has begun issuing query letters to taxpayers with crypto assets. These letters aim to gain insight into taxpayers' investment in crypto assets and the trades undertaken to enable SARS to assess taxpayers' compliance in this regard. This effort is supported by advanced technologies such as artificial intelligence and machine learning, which SARS say it is using to enhance its audit capabilities.
