- The South African Revenue Service has announced that crypto assets will be included in its compliance programmes, following advice to taxpayers to disclose information about their cryptocurrency transactions and investments.
- The tax authority expressed concern that taxpayers do not declare their crypto assets and trades on tax returns, despite the legal requirement to report all income and assets. It reiterated its previous invitation for crypto exchanges and individuals involved in trading or holding crypto assets to disclose their activities voluntarily.
- Consequently, Sars is increasing the capacity of its audit teams to support the enforcement of cryptocurrency investments and profits. The service is increasing its use of artificial intelligence, machine learning, and algorithms to improve its operations.
Sars acknowledged that it has recently issued query letters to taxpayers with crypto assets to gain insights into their investments and trades and assess compliance.
Following a study of the crypto industry and its potential risks to South Africa’s economy and financial sector, the Financial Sector Conduct Authority (FSCA) previously disclosed that over 5.8 million South Africans own crypto assets, indicating that nearly 10% of the population owns some form of cryptocurrency.
In 2022, FSCA declared crypto assets as financial products under the FAIS Act due to increasing risks and fraudulent activities in the crypto asset environment.
As part of a recent development, SARS is working with the FSCA to provide information on registered crypto asset service providers and is receiving data directly from local exchanges.
The tax authority emphasises that most taxpayers and traders are honest and aims to assist them in meeting their legal obligations.
Focused on providing clarity regarding these obligations and simplifying compliance processes, SARS highlighted its engagement in global information exchange through multilateral agreements.
Sars also announced that the provision of offshore crypto accounts will be addressed in a multilateral agreement signed by the finance minister in November, allowing South African taxpayers to exchange information across jurisdictions.
According to reports, as part of its efforts to manage the crypto sector, the FSCA is cracking down on illegal crypto financial services and is investigating 30 cases of entities operating without a licence.
As of July 2024, the authority had received 383 licence applications, with 63 approved and 5 declined due to applicants failing to meet fit and proper requirements.
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In April 2024, South Africa's Financial Intelligence Centre (FIC) issued a draft directive requiring crypto asset service providers to transmit and verify certain identity information and provide documentation when conducting a cryptocurrency transaction.