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SARS Cracks Down on Crypto Traders: New Unit Targets Non-Compliance

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The South African Revenue Service (SARS) has recently launched a specialised cryptocurrency unit designed to target crypto traders and investors who fail to comply with the country’s tax laws. This development sends a strong message to South African taxpayers dealing with crypto-assets, whether held locally or internationally. SARS’ new unit is equipped with the power to track crypto activity and enforce tax compliance, making it crucial for crypto traders to stay on top of their obligations.

A New Era for Crypto Tax Compliance in South Africa

This newly formed unit has extensive powers, including direct access to local crypto-asset exchanges and the ability to monitor transactions both in South Africa and abroad. As tax experts at Tax Consulting SA point out, this means SARS can now track non-compliance across borders, expanding its reach and control.

The unit comprises highly trained professionals with a specific skill set designed to audit and investigate crypto traders thoroughly. SARS has the ability to review historical tax periods, initiate in-depth audits, and take action against non-compliant individuals.

Recategorization of Crypto Income: A Hidden Tax Trap

One of the most significant powers of SARS’ new unit is its ability to recategorize crypto profits. What many taxpayers may not realize is that SARS can shift crypto proceeds from capital gains, which are taxed at 18%, to income, which could attract a tax rate as high as 45%, depending on the taxpayer’s income bracket.

This shift in categorization can lead to staggering tax liabilities, potentially wiping out a substantial portion of a trader’s crypto gains. Tax experts warn that this process isn’t commonly understood, leaving many crypto holders vulnerable to unexpected tax hikes.

The Burden of Proof: A Major Challenge for Crypto Traders

The real challenge for crypto traders comes in proving that their assets are capital in nature, which would entitle them to the lower capital gains tax rate. Without clear-cut guidelines on what qualifies as capital assets, many taxpayers might find themselves at the mercy of SARS’ interpretation. This could lead to prolonged disputes and costly legal battles, making meticulous record-keeping essential for anyone trading in cryptocurrency.

SARS is Already Sending Notices: Non-Compliance Has Consequences

SARS has already begun sending out Notices of Audit and Requests for Relevant Material to crypto holders. Tax experts caution that this is not merely a data-gathering exercise—SARS already has the information it needs. The notices are a clear indication that the tax authority is zeroing in on non-compliant traders, and penalties for non-compliance could include severe fines or even jail time.

Crypto traders who haven’t declared their earnings in the past should be aware that SARS can go back and audit historical transactions. Ignoring these notices or failing to engage with the Voluntary Disclosure Programme (VDP) could lead to substantial penalties and even legal consequences.

Bank Accounts at Risk: SARS’ Aggressive Approach

In recent years, SARS has proven that it has the power to take aggressive measures to recover unpaid tax debts. Recent court cases show that SARS can instruct banks to directly seize funds from a taxpayer’s account to settle outstanding debts, without the account holder’s permission.

This underscores the importance of staying compliant with South Africa’s tax laws, as SARS leaves very little room for taxpayers to hide from their obligations.

Get Ahead of the Game

As SARS ramps up its efforts to crack down on crypto traders, it’s crucial for anyone involved in cryptocurrency trading or investment to ensure they are fully compliant with tax regulations. With the help of the Voluntary Disclosure Programme and proper record-keeping, traders can mitigate their risks and avoid facing severe penalties in the future.

SARS Cracks Down on Crypto Traders

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