The South African Revenue Service (SARS) will move to enforce tax compliance on crypto assets.
This, as the tax authority has witnessed what it describes as “phenomenal growth” of the use of various digital currencies.
According to SARS, more than 5.8 million South Africans hold a crypto asset, with Southern Africa boasting the largest uptake of Bitcoin in the world.
However, the tax authority says it is “concerned” these crypto assets and trades are not being declared on taxpayers’ tax returns.
“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.
“As a follow-up, SARS will be including crypto assets into its compliance programmes. Consequently, SARS is engaging with the Financial Sector Conduct Authority regarding the provision of information on registered crypto asset service providers. SARS is also receiving information directly from the local exchanges.”
The taxman previously lauded the use of artificial intelligence (AI) and machine learning to weed out criminality and non-compliance.
According to SARS, through multilateral agreements, it is exchanging information with other tax authorities globally.
Resultantly, 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 to South African taxpayers.
“SARS believes 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.
“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.”
In addressing crypto compliance, SARS states it is increasing capability in its audit teams to support enforcement initiatives.
“SARS has resorted to greater use of AI, machine learning and algorithms to process our work. In implementing our mandate, SARS has recently issued query letters to taxpayers with crypto assets. 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 commissioner Edward Kieswetter reminds taxpayers to honestly and dutifully honour their legal obligations by declaring all their income, saying: “SARS has been working ceaselessly to ensure compliance by all taxpayers, 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. Let all know that technology has enhanced SARS’s ability to root out non-compliant taxpayers. Be warned, SARS will pursue all without fear, favour or prejudice.”
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