SARS Takes Action: Crypto Asset Enforcement Notices Issued
South African Revenue Service (SARS) has intensified its focus on crypto asset trading as evidenced in recent enforcement letters issued to taxpayers. This development signifies that SARS has allocated specialised resources for the enforcement and monitoring of crypto asset transactions, ensuring compliance with South African tax laws.
What You Need to Know:
SARS is addressing non-compliance in the crypto trading sector by sending out enforcement letters. This reflects a structured approach to enforcement, signaling increased scrutiny of crypto-related tax matters.
SARS confirmed that has access to trading data directly from crypto exchanges. This includes information indicating taxpayers who have traded in crypto assets but may not have disclosed these activities on their tax returns.
The enforcement letters detail specific tax periods (2018–2022) for which trading data has been received. We can expect that this targeted approach will enable SARS to efficiently address non-compliance within these years.
Taxpayers have been given a 21-day window to address and rectify any non-compliance. This period includes disclosing any previously undeclared crypto-related income or gains.
Taxpayers can still make use of the Voluntary Disclosure Program (VDP) to avoid potential penalties and interest if the disclosure is made voluntarily before SARS initiates further action.
Actionable Advice for Tax Practitioners:
Review Client Crypto Transactions: Encourage clients to review their crypto trading activities for the tax years highlighted in the letters. Promptly identify any non-disclosures or misstatements.
Apply for VDP: Assist clients in utilising VDP to correct their tax records and minimise penalties. Even with the SARS Notice, the VDP remains a viable solution for clients seeking to align with SARS requirements.
Educate on Reporting Obligations: Ensure that clients understand the tax implications of crypto trading, including the classification of gains as taxable income or capital gains.
Act Promptly: Highlight the urgency of the 21-day rectification period to avoid audits or enforcement actions by SARS.
The establishment of the Crypto Asset Unit and SARS's data-sharing arrangements with crypto exchanges emphasise the importance of compliance in this evolving sector.
Read more on crypto assets and tax on the SARS website.
