The South African Revenue Service (SARS) is cracking down on crypto asset holders who have failed to report their cryptocurrency transactions on tax returns in recent years.
A specialized cryptocurrency asset unit, operating within the SARS audit team, has started issuing letters to taxpayers who have not disclosed their crypto activities and the associated tax obligations from transactions on cryptocurrency exchanges.
According to Thomas Lobban, director at Ibex Consulting (a division of Latita Africa), audits typically cover the past five years, though SARS has the authority to investigate further back. The tax authority leverages data from cryptocurrency exchanges, cross-referencing it with submitted tax returns to identify discrepancies and flag taxpayers for closer scrutiny.
“SARS is entitled to go to any person and request information from them regarding you about your tax affairs, including cryptocurrency exchanges,” Lobban said in a recent interview.
“The SARS team is well versed in crypto matters, they are intelligent, they are aggressively pursuing their mandate, and they are well resourced to do so.”
Lobban noted that SARS has been actively recruiting experts with the technical expertise to conduct crypto audits. These efforts align with South Africa’s broader goal of improving compliance with the Financial Action Task Force (FATF) policies which in 2023 placed South Africa on its ‘grey list.’
Nigeria
, South Africa
Placed under FATF Grey List – A Total of 8 African Nations Now Under Scrutiny
Interestingly, Botswana was grey listed by FATF before its removal in early 2022 after passing a virtual assets bill to regulate trading of cryptohttps://t.co/wOOrKihLyM
— BitKE (@BitcoinKE) February 28, 2023
The country aims to be removed from this list by June 2025 to enhance its attractiveness for foreign direct investment.
Last year [2024], SARS began issuing notices to taxpayers, informing them that it was aware of their cryptocurrency transactions.
Failure to provide requested information could be deemed a criminal offense under the Tax Administration Act, the officers say. The national revenue authority has adopted a… pic.twitter.com/NZ5vJJlHZz
— BitKE (@BitcoinKE) September 9, 2024
The letters advised recipients to rectify any discrepancies by either submitting a revised tax return, responding to the notice, or applying for the Voluntary Disclosure Programme (VDP) within 21 days of receiving the notification.
“Failure to declare crypto asset gains or income will result in SARS conducting a comprehensive audit of your tax affairs, which may attract assessment, interest and penalties… In the event you intend to use VDP, notify us within 21 days from the date of issue of this letter,” the crypto asset unit said in a letter to one taxpayer.
Lobban recommended that non-compliant taxpayers seize the ‘first-mover advantage’ by submitting a revised return or applying for the Voluntary Disclosure Programme (VDP). Based on Ibex Consulting’s experience, those who wait for SARS to initiate an audit often face penalty charges of up to 100% of their tax liability.
“If you receive notification, engage openly with the crypto unit, give them the documents they want and negotiate the penalty percentage,” said Lobban.
“We can absolutely confirm that SARS has the ability to audit the blockchain and trace your transactions.”
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