Unreported Crypto Assets

SARS is concerned that many crypto holders and traders are failing to declare these assets in their tax returns. As part of its legal mandate, SARS must account for all income and assets held by taxpayers, including crypto. The agency had previously encouraged crypto exchanges to disclose relevant data voluntarily, and will now officially include crypto assets in its compliance programs.

Collaboration and International Agreements

SARS is collaborating with the Financial Sector Conduct Authority (FSCA) to gather information on registered Crypto Asset Service Providers (CASPs). Additionally, the agency receives data from local exchanges to ensure compliance among crypto investors. Through multilateral agreements, SARS is also exchanging information with global tax authorities and will soon extend this to offshore crypto accounts, with an agreement expected in November 2024.

Enforcement and AI Integration

To enforce compliance, SARS is enhancing its audit teams and incorporating advanced technologies like artificial intelligence, machine learning, and algorithms. Recently, the tax authority has sent query letters to South Africans holding crypto assets to assess their tax compliance.

Taxation on Crypto

The Institute of Information Technology Professionals South Africa (IITPSA) emphasizes that cryptocurrencies are subject to the same tax and foreign exchange regulations as traditional fiat currencies. Tax implications arise when crypto is sold, exchanged, or spent. Candice Mesk, director of the Developer User Group, explained that tax is calculated based on the "first in, first out" principle, with gains or losses determined by the value of the oldest token when purchased and sold.

For regular investors, capital gains tax applies, while income generated through trading is taxed as revenue. All crypto earnings must be declared to avoid penalties, with SARS stressing the importance of compliance for all taxpayers.