IRS Continues Pursuit of Cryptocurrency Tax Evaders
**South African Revenue Service Cracks Down on Cryptocurrency Tax Evasion**
In a significant move to bolster tax revenue, the South African Revenue Service (SARS) has established a specialized unit focused on collecting outstanding tax liabilities from the cryptocurrency sector [1][4][5]. This escalation in enforcement efforts comes after years of warnings and follows a growing concern over unpaid taxes in the cryptocurrency sector.
## Current Enforcement Measures
To strengthen its grip on the cryptocurrency market, SARS has implemented several measures. All crypto exchanges, wallets, and other virtual asset service providers (VASPs) are now required to register their businesses, granting SARS direct access to transaction data and enabling cross-referencing of wallet activity with tax returns [1].
Individual taxpayers are also mandated to disclose all cryptocurrency holdings, not just income from sales or conversions. This includes wallet balances, airdrops, and token swaps [1]. Furthermore, individuals engaged in crypto trading or arbitrage must specify crypto assets in their “International Investment Type Details” when applying for international transfer approval [2].
SARS leverages data from licensed crypto asset service providers (CASPs), who are required to register with the Financial Sector Conduct Authority. Over 240 CASPs had been licensed by the end of 2024, giving SARS a comprehensive view of user transactions [1]. The authority can now match wallet activity with filed returns and auto-assessments, making it easier to detect undeclared crypto holdings or income [1].
SARS has launched initiatives like Project AmaBillions to increase scrutiny of crypto traders. The agency is issuing tax notices and clarifying exchange control regulations, demanding immediate compliance from traders [4][5].
## Current Status of Efforts
SARS is actively auditing crypto traders and enforcing compliance, with a particular focus on ensuring all assets and income are declared [1][4][5]. The voluntary compliance window is closing, and financial advisers are urged to help clients disclose all relevant information before enforcement actions intensify [1].
A recent High Court ruling found that current Exchange Control Regulations do not apply to cryptocurrency transactions, as cryptocurrency is not considered “money” or “capital” under existing law. However, this ruling is suspended pending appeal, so its long-term impact remains uncertain [3]. Despite the legal grey area on exchange controls, SARS continues to enforce tax obligations on cryptocurrency as a financial product under existing tax law [1][4].
## Summary Table
| Measure/Requirement | Details | |-------------------------------------|----------------------------------------------------------------------------------------------| | VASP/Exchange Registration | Mandatory for all virtual asset service providers[1] | | Crypto Asset Disclosure | Required for all holdings and income, not just sales[1] | | International Transfer Reporting | Crypto assets must be specified in applications for international transfers[2] | | Data Access | SARS uses data from registered CASPs to verify declared holdings[1] | | Project AmaBillions | Increased audits and issuance of tax notices for crypto traders[4][5] | | Legal Status | High court ruled crypto not subject to exchange controls (ruling suspended on appeal)[3] |
As SARS' specialized crypto unit continues to recruit specialists for cryptocurrency audits and works with exchanges to gather data on South African crypto holders, the focus remains on recovering taxes owed over a five-year period [1][4][5]. The South African Revenue Service is actively pursuing cryptocurrency holders for unpaid taxes, signalling a significant shift in the country's approach to cryptocurrency taxation.
- Enforcement measures introduced by the South African Revenue Service (SARS) include the registration of all crypto exchanges, wallets, and virtual asset service providers (VASPs), allowing SARS direct access to transaction data and facilitating cross-referencing of wallet activity with tax returns.
- In order to ensure all cryptocurrency holdings are declared, individuals are mandated to disclose their holdings, not just income from sales or conversions, including wallet balances, airdrops, and token swaps.
- As part of its efforts to monitor the cryptocurrency market, SARS is leveraging data from licensed crypto asset service providers (CASPs) and using it to match wallet activity with filed returns and auto-assessments, making it easier to detect undeclared crypto holdings or income.
