Sars is concerned that taxpayers are not declaring crypto assets and trades on their tax returns, and it is tightening its monitoring to ensure compliance.
The revenue service said in a statement on Wednesday that there was “phenomenal” growth in the use of various digital currencies, mostly crypto assets.
“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. Sars is concerned that these crypto assets and trades are not being declared on the tax returns of taxpayers.
“Sars 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.
“Sars will be including crypto assets into its compliance programmes. Consequently, Sars is engaging with the Financial Sector Conduct Authority (FSCA) regarding the provision of information on registered crypto asset service providers.
“Sars is also receiving information directly from the local exchanges.”
Sars said that through its multilateral agreements it was exchanging information with other tax authorities globally.
The provision of offshore crypto accounts would be the subject of a multilateral agreement to be signed by the finance minister in November.
That would catalyse the cross jurisdictional exchange of such information on SA taxpayers, said the service.
About three months ago, Pick n Pay reported that more than a year after it pioneered bitcoin payments at its tills around the country it was doing R1m a month in sales with shoppers buying groceries, data and airtime and also paying municipal bills using digital currency. Half of all transactions were for R500 and under. The transaction amount was capped at R10 000.
Sars recently issued query letters to taxpayers with crypto assets to gain more information about their investments and trades undertaken to enable it to assess taxpayers’ compliance.
“Taxpayers who could potentially be affected and are understandably concerned about their crypto asset compliance are reminded of the Sars voluntary disclosure programme (VDP) to facilitate compliance.
“This opportunity has strict conditions, one being that taxpayers must approach Sars first. Once Sars has identified the taxpayer for audit, they are precluded from applying for the VDP.”
Sars said that it was working to make it easy and simple for taxpayers and traders to comply seamlessly with their obligations, but would make it “hard and costly” for those who were wilfully noncompliant.
To address crypto compliance, the tax authority is increasing the capability in its audit teams to support its enforcement initiatives. It is relying also on greater use of artificial intelligence, machine learning and algorithms to process it.
Sars commissioner Edward Kieswetter warned that this technology had enhanced Sars’ ability to root out noncompliant taxpayers. “Be warned, Sars will pursue all without fear, favour or prejudice,” he said.
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