South Africa Cracks Down on Crypto with New Tax Rules
South African tax authorities require citizens to declare crypto assets under new rules, aiming to increase transparency and prevent tax avoidance.
The South African Revenue Service (SARS) has announced that taxpayers must declare their crypto assets through its Voluntary Disclosure Programme (VDP). This call for transparency comes as digital currencies like Bitcoin and Ripple’s XRP continue to grow in popularity among South Africans.
Media Release: SARS Warns About Crypto Asset Compliance
SARS has noted the phenomenal growth of the use of various digital currencies by many South Africans. Prominent amongst these is the prevalence of crypto assets... https://t.co/EXlWYlYrVApic.twitter.com/fDbggUzSA1 — SA Revenue Service (@sarstax) October 9, 2024
Given the surge in crypto usage, SARS' decision isn’t unexpected. Many anticipated these tax rules after the Financial Sector Conduct Authority (FSCA) recognized crypto as a financial instrument.
South Africa is witnessing rapid growth in crypto transactions, similar to trends in other countries. A media poll suggests that 40% of the population has used Ripple or other cryptocurrencies for online payments. According to SARS data, around 5.8 million South Africans own cryptocurrencies and are involved in a significant amount of Bitcoin transactions.
Despite crypto's growing acceptance, SARS warns of risks like tax avoidance. Some taxpayers are reportedly failing to disclose their crypto holdings on tax forms. To address this, SARS is emphasizing the need for transparency through its Voluntary Disclosure Program, encouraging citizens to report all assets, including digital currencies. In an official statement from October 9, SARS urged traders and crypto holders to be transparent.
To further this effort, SARS has partnered with crypto exchanges to gather information on transactions. The agency is also collaborating with other organizations, such as the FSCA, to gather data from digital currency service providers. Both local and international exchanges are cooperating to improve transparency and compliance.
SARS has promised a simplified process for reporting crypto assets, aiming to make it easier for taxpayers to comply. The agency is increasing its number of audit teams and using machine learning and AI to enhance compliance. SARS Commissioner Edward Kieswetter has called on citizens to cooperate with the new rules.
However, SARS has warned that non-compliance will have consequences. Kieswetter emphasized that the agency will pursue those who deliberately ignore the new tax regulations. Transparency in crypto asset reporting is also being promoted by the FSCA, which has been active in targeting individuals and firms that fail to disclose their crypto transactions.
