Sars provides clarity around crypto asset transaction reporting

Following the implementation of the Crypto-Asset Reporting Framework (Carf) by the South African Revenue Service (Sars) on 1 March, taxpayer uncertainty in this space has reached an all-time high.

To provide clarity and calm the masses of South African taxpayers engaged in crypto-related activity, Sars issued a media statement on 6 March confirming: “Individual taxpayers do not report directly under the Carf and must continue declaring crypto asset transactions through their normal income tax returns.”

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On the flipside, a crypto asset service provider (Casp) must report certain crypto asset transaction information to Sars, which may then also be exchanged with more than 120 other participating jurisdictions.

The framework aims to combat offshore tax evasion and illicit activities linked to crypto assets through enhanced multilateral cooperation and automatic information exchange.

Automatic exchange of information

South African taxpayers involved in crypto transactions or holding digital assets should anticipate increased scrutiny and enhanced information sharing among tax authorities.

This underscores the importance of accurate reporting and full compliance in their income tax returns.

The same due consideration, if not a higher degree, must also be paid when considering financial emigration from South Africa while holding crypto assets – capital gains tax on crypto assets is real!

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Listen: New Sars unit targets crypto non-compliance

It is worth noting that the investigation into South African taxpayers’ offshore interests has long been on the cards for Sars, with foreign asset and income disclosure notices issued as far back as 2020, requiring a blanket disclosure of offshore assets.

The knock-on effect of this is the promotion of automatic exchange of information, creating a legal reporting obligation for both revenue authorities and crypto asset service providers (Casps).

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According to Sars’s recent media statement: “For service providers, the Carf provides clarity, consistency and a level playing field. For the tax system, it strengthens fairness, early risk detection and voluntary compliance.

“The Carf marks an important step towards a modern, transparent and globally aligned tax system.”

At the time, taxpayers may have been tempted to hide the revenue authority’s requests under the mattress.

Today, however, there appears to be no escape for non-compliant South African taxpayers, particularly with crypto asset transactions firmly on Sars’s radar.

How to come clean with Sars

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To aid taxpayers in their quest for compliance, Sars has specifically included line items pertaining to crypto in individual tax returns as a friendly reminder:

Source Author-provided

Following normal income tax rules, income from crypto assets can be taxed either as “gross income” or may be regarded as “capital in nature”  and taxed under such paradigm.

Listen/read: Obligatory crypto reporting and SA tax compliance

Noteworthy, and especially if there is a ‘bull market’, under specific circumstances taxpayers are entitled to claim expenses associated with the crypto asset receipts or accruals, provided that “such expenditure is incurred in the production of the taxpayer’s income and for purposes of trade”.

Where taxpayers opt to rather invest and hold their crypto assets long term, on disposal any gain or loss must be declared as part of the taxpayer’s taxable income.

As Sars warns on its website: “The onus is on taxpayers to declare all crypto asset-related taxable income in the tax year in which it is received or accrued. Failure to do so could result in interest and penalties.”

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Voluntary disclosure and (separate) remission of interest

For South African taxpayers wishing to rectify historical non-compliance by means of a voluntary disclosure of information, as is the case for many crypto traders, or to ensure their current compliance record remains unblemished, there are various solutions available from a legal standpoint.

The most proactive way to affect this disclosure is by means of a Voluntary Disclosure Programme (VDP) application. The VDP application allows you to legally declare any undeclared income or gains, but not be subject to the penalties which would generally stem from such a non-disclosure.

The 2026 Budget Speech further proposed that taxpayers may in addition apply for a separate remission of interest. This amendment is set to take effect from 1 March 2026.

This is first prize from a compliance perspective and should be considered as a priority for all taxpayers who have not yet received any formal correspondence from Sars identifying a specific liability owed.

Where you find yourself on the wrong side of Sars, there is a first-mover advantage in seeking the appropriate tax advice and ensuring the necessary steps are taken to protect both yourself and your crypto assets from paying for your crimes of non-compliance.

However, where things do go wrong, Sars must be engaged legally, and we generally find it to be agreeable where a correct tax strategy is followed.

Jashwin Baijoo is partner and head of Strategic Engagement & Compliance at Tax Consulting SA.

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