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The South African Revenue Service (SARS) is the government agency in charge of collecting taxes and enforcing tax laws in the country, even for crypto traders. The tax authority highlighted that many South Africans need to declare their digital assets and trades when submitting tax returns.Ā
As millions of South Africans dive into digital assets, SARS is tightening its grip on crypto holders and traders who fail to declare their earnings.Ā
South Africaās Crypto Boom and The Tax Concerns
With 5.8 million South Africans holding crypto assets, the nation has become a global leader in Bitcoin adoption. However, SARS is increasingly worried that many citizens must declare their digital assets in tax filings.Ā
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On October 9th, the tax authority issued a reminder to taxpayers. It stated that South African law requires all income, including digital assets, to be declared under the SARS Voluntary Disclosure Programme (VDP).
To enforce compliance, SARS revealed its collaboration with crypto exchanges and involved key players like the Financial Sector Conduct Authority (FSCA). The goal is to gather user information and ensure crypto traders and holders meet their tax obligations.Ā
Soon, digital currencies will be fully integrated into South Africaās tax compliance framework.Ā
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Global Efforts and Technological Advancements
In addition to local measures, SARS is stepping up its international efforts. The agency disclosed that it is in talks with other tax authorities worldwide. This effort is to strengthen agreements on offshore crypto accounts South Africans hold.Ā
The agency is awaiting the Minister of Financeās approval of these agreements by November. SARS said it is developing AI-powered systems to track crypto activity better and enforce compliance.Ā
In addition, the machine learning algorithms that will help identify potential non-compliance crypto users are in the process. SARS also sends query letters to crypto investors seeking further details about their digital asset portfolios.
FSCAās Regulatory Push
The financial watchdog FSCA has been actively regulating South Africaās crypto industry. Since it declared crypto assets as financial products in 2022. In June 2023, the FSCA began issuing licenses to crypto service providers. By July, 383 applications had been submitted.Ā
Of these, 63 have been approved, while five were denied due to non-compliance with regulatory standards. The FSCA is investigating 30 cases of illegal crypto activities in South Africa.Ā
Entities operating without proper licenses are scrutinized as the body seeks to bring more order and security to the fast-growing crypto market. In 2021, Binance Exchange halted all crypto derivative offerings in South Africa, citing regulatory pressure from local monetary authorities as the cause.
