South African Revenue Service may crack down on crypto tax defaulters

The South African Revenue Service (SARS) has warned individuals and entities involved in cryptocurrency transactions in the country to register with the agency as part of a broader effort to clamp down on tax evasion.

In a recent interview with Bloomberg, SARS Commissioner Edward Kieswetter emphasised that failure to register is now a violation of the law, signalling a significant shift in the agency’s approach to regulating the rapidly growing crypto market.

“We have invited taxpayers, exchanges, and other intermediaries to register, because now, if you do not register, you are breaking the law,” Kieswetter said. “Once they have registered, we now know of their existence, and we can begin to track their business activities.”

This move comes as SARS seeks to bolster its revenue collection efforts, with preliminary data showing that tax collections for the fiscal year ending March 2025 reached R1.855 trillion ($98.32 billion), exceeding Treasury estimates by nearly R9 billion. Kieswetter identified crypto assets as a key area for potential revenue growth, given the scale of their adoption in South Africa.

According to SARS data, nearly 6 million South Africans hold some crypto asset presently, making the country a significant player in the global cryptocurrency landscape. 

Southern Africa, in particular, accounts for the highest uptake of Bitcoin worldwide, highlighting the region’s prominence in the digital asset space. The Financial Sector Conduct Authority (FSCA) further underscored the market’s size in 2022, estimating that R520 million ($27.56 million) is traded monthly through South African crypto asset service providers. That same year, the FSCA officially classified cryptocurrencies as financial products, bringing them under stricter regulatory oversight.

SARS is now intensifying its efforts to identify and monitor those involved in crypto transactions, aiming to ensure compliance with tax obligations. However, Kieswetter acknowledged that the process will not yield immediate results.

“It is a multi-pronged attack, but I think it is going to take some time before we get completely on top of it,” he said. 

South Africa’s plan for crypto tax 

The agency has already taken steps to strengthen its capabilities. These include establishing a dedicated crypto asset unit within its audit division and collaborating with crypto exchanges to cross-reference transaction data with tax filings.

The push for registration marks a turning point in South Africa’s approach to cryptocurrency taxation.

For years, many South Africans believed that crypto gains were beyond the reach of SARS, a misconception clarified by the South African Reserve Bank (SARB) in 2023 when it confirmed that digital assets are subject to tax laws. With the new registration requirement, SARS aims to close this knowledge gap and bring defaulters in.

Non-compliance could result in penalties or legal action, though specific enforcement measures have yet to be detailed.

The initiative aligns with global trends as tax authorities worldwide grapple with the challenges of dealing with decentralised digital currencies.

In Canada, for instance, the Canada Revenue Agency (CRA) has operated a specialised cryptocurrency unit since 2017, conducting audits to ensure compliance. Similarly, the U.S. Internal Revenue Service (IRS) is set to introduce Form 1099-DA in 2025 to streamline reporting digital asset transactions.

South Africa’s efforts reflect a growing recognition that cryptocurrencies, while innovative, must be integrated into existing tax frameworks to prevent revenue leakage. And, the stakes are high. The country’s robust crypto market presents both an opportunity and a challenge for SARS, which collected over R23 trillion ($1.219 trillion) in revenue since 1994 and has consistently surpassed its targets. 

As Kieswetter noted during a recent briefing, the agency’s success in the 2024/2025 fiscal year, achieving a gross collection of R2.303 trillion (1.22.06 billion), a 6.9% increase year-on-year, demonstrates its effectiveness.

However, with crypto assets representing an untapped revenue stream, SARS is determined to adapt its strategies to the digital age.