SARS is coming after crypto traders – what you need to know

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SARS Targets Cryptocurrency Traders for Non-Compliance

In a move to crack down on potential tax evasion, the South African Revenue Service (SARS) is actively monitoring cryptocurrency traders, according to tax experts at Tax Consulting SA.

The experts warn that taxpayers must be aware of the stringent reporting requirements associated with crypto-related activities, even if they occur on trading platforms and do not result in fiat currency gains. These activities carry tax obligations, including the declaration and payment of taxes on any benefits derived from them.

SARS and the South African Reserve Bank (SARB) have reiterated their stance on eradicating non-compliance through existing working groups and international information exchanges. The revenue collector and exchange control gatekeeper have addressed the common misconception among taxpayers that crypto profits or gains fall outside the South African tax net on numerous occasions.

Classification of Crypto Assets

In South African tax law, crypto assets are considered financial instruments under the Income Tax Act. This means that any profits resulting from dealing in crypto assets may be subject to tax disclosure and liability towards SARS.

The experts explain that while this disclosure may seem straightforward in theory, the reality is more complicated. Cryptocurrency transactions are subject to a range of tax regulations, including capital gains tax, income tax, and even VAT in some cases. Moreover, the rules around cryptocurrency taxation are constantly evolving, with different jurisdictions interpreting the law differently.

SARS’ Stance

The Taxation Laws Amendment Act, 23 of 2020 (“TLAB”) has concretised the classification of a “crypto asset” in South African law. SARS describes it as “a digital representation of value that is not issued by a central bank, but is traded, transferred and stored electronically by natural and legal persons for the purpose of payment, investment and other forms of utility, and applies cryptography techniques in the underlying technology.”

Under South African domestic law, a crypto asset is not considered a currency but rather has either a capital or revenue nature, depending on the circumstances. This means that ordinary income tax rules will apply to crypto assets, and traders must declare any losses or gains per tax year, which will fall either under “gross income” or “capital gain,” depending on the circumstances.


A common misconception among the crypto community is that a “taxable event” only occurs upon the disposal of a crypto asset, resulting in the realisation of a fiat currency profit or gain. However, any sale, exchange (crypto asset for crypto asset), or disposal of crypto assets is likely to be considered a taxable event.

The key differentiating factor, which could result in a massive tax liability differential, is whether the disposed crypto asset can be considered a capital asset or trading stock. If the correct capital intent and objective external factors are shown, taxpayers will only be subjected to Capital Gains Tax (CGT). If SARS views the profits from crypto dealings as income, they will be taxed at marginal rates applicable to individuals (up to 45%) or companies (27%).

The tax experts emphasize that following good crypto returns, it may be tempting to “cash in” on profits, but taxpayers should bear in mind that SARS is strengthening its crackdown on crypto-tax compliance and demanding its share. Those who hold or have ever held crypto should not assume that historical non-declaration means that SARS will not look to tax these profits in the future.

SARS is well within its rights to look into all historical transactions where a taxpayer has failed to disclose material facts, committed fraud, or made misrepresentations. Even if a crypto investor or trader is in SARS’ good books, they are still not out of the woods yet, especially where foreign trading platforms are involved, as the South African Reserve Bank authorization on an Advanced Trading Model would be needed, which is often not obtained.

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