The South African Revenue Service (SARS) has announced new measures aimed at enforcing tax compliance on cryptocurrency holdings, a move that aligns with global trends in the regulation of digital assets. According to local reports, SARS now requires taxpayers who hold or trade digital currencies to declare their crypto assets, signaling a significant step towards greater oversight in the crypto sector.
This development follows similar moves by other tax authorities, such as Nigeria’s Federal Internal Revenue Service (FIRS), which recently introduced tax laws to regulate cryptocurrency transactions. As the South African government intensifies its efforts to enhance transparency in the crypto market, taxpayers are expected to comply with these new regulations or face penalties.
SARS to Target Non-Compliant Crypto Investors
According to SARS, more than 5.8 million South Africans currently hold cryptocurrency, but many of them have not declared their digital assets in their tax filings. The tax authority, working closely with the country’s Financial Sector Conduct Authority (FSCA), is collecting information on registered crypto asset service providers. SARS is also receiving data directly from local exchanges to better monitor compliance.
SARS Commissioner Edward Kieswetter has emphasized the importance of crypto investors meeting their tax obligations. He stated that evading taxes undermines the integrity of the tax system and places an unfair burden on compliant taxpayers. “This is not only unfair to honest taxpayers but also affects the vulnerable in society disproportionately by limiting the state’s ability to deliver social grants and other much-needed social benefits,” Kieswetter noted.
SARS is urging taxpayers to voluntarily declare their crypto assets. The authority has made it clear that failure to comply could result in significant penalties. “We will make it hard and costly for those who are willfully non-compliant,” Kieswetter warned.
Leveraging Technology for Tax Enforcement
SARS is significantly upgrading its capabilities to tackle crypto tax evasion. Kieswetter confirmed that the tax authority is using advanced technologies such as artificial intelligence (AI), machine learning, and sophisticated algorithms to track non-compliance more effectively.
Additionally, SARS has sent query letters to taxpayers believed to hold crypto assets, requesting detailed information on their investments and trading activities to assess their tax compliance. This proactive approach is designed to ensure that individuals and businesses do not evade their tax responsibilities in the growing crypto market.
Kieswetter added, “Let all know that technology has enhanced SARS’ ability to root out non-compliant taxpayers, and the SARS will pursue all without fear, favour, or prejudice.” He also revealed that SARS is exchanging information with other tax authorities globally through multilateral agreements, which will further support its enforcement efforts.
Crypto Regulation in South Africa
This announcement from SARS is part of a broader effort by South African regulatory bodies to manage the crypto sector more effectively. On October 19, 2022, the FSCA issued General Notice 1350 of 2022, declaring cryptocurrency a financial product under the Financial Advisory and Intermediary Services Act (FAIS Act). This formal recognition brought cryptocurrency under the same regulatory umbrella as traditional financial products, requiring crypto asset service providers to comply with financial advice and intermediary services regulations.
In December 2023, the FSCA reported that over 5.8 million South Africans—nearly 10% of the population—held cryptocurrency. This revelation came after a comprehensive study on the crypto industry and its potential risks to South Africa’s economy and financial sector. In response, the government has been working to tighten its regulatory grip on the sector.
In April 2024, South Africa’s Financial Intelligence Centre (FIC) issued a draft directive requiring crypto asset service providers to verify the identities of users and submit certain documents when conducting crypto transactions. This directive is part of an ongoing effort to ensure that the crypto market complies with anti-money laundering (AML) and counter-terrorism financing (CTF) laws.
FSCA’s Efforts to Regulate the Crypto Market
The FSCA has also been active in managing the licensing and regulation of crypto asset service providers. In July 2024, the authority announced that it had received 383 license applications, of which 63 were approved and 5 were declined for failing to meet fit and proper requirements. At the same time, the FSCA launched an investigation into 30 cases of entities operating without a license, further demonstrating its commitment to cleaning up the sector.
As part of its broader regulatory strategy, SARS is collaborating with the FSCA to obtain necessary data from registered crypto asset service providers. This partnership will give SARS access to the information it needs to ensure that taxpayers holding crypto assets are properly taxed.
Conclusion: The Road Ahead for Crypto Tax Compliance in South Africa
With these new regulations and enforcement measures, South Africa is positioning itself as a global leader in crypto taxation. The country’s regulatory bodies are working in concert to ensure that the rapidly growing crypto market operates within the bounds of the law, protecting both the economy and the financial system from potential risks.
For South African taxpayers holding digital currencies, this is a clear signal to take their tax responsibilities seriously. As SARS ramps up its capabilities with AI and other advanced technologies, those who fail to comply could face hefty penalties. The message is clear: crypto tax compliance is no longer optional in South Africa, and the authorities are watching closely.
