SARS cracking down on crypto

SARS’ draft Crypto-Asset Reporting Framework (CARF) and revised Common Reporting Standard (CRS) will significantly increase crypto traders’ compliance obligations.

This is according to Tax Consulting SA’s Associate Director and Head of Strategic Engagement & Compliance, Jashwin Baijoo, and Team Lead of Tax Legal, Micaela Paschini.

They explained that the recently published CARF and CRS, which are proposed to take effect on 1 March 2026, will increase the regulatory and reporting burden on crypto service providers and taxpayers in South Africa.

“This strengthening of tax treatment leverages the automatic exchange of information with other competent revenue authorities to uncover global crypto assets and activities,” Baijoo and Paschini said.

South Africa isn’t the only country taking steps towards enhancing tax regulations surrounding crypto transactions.

“As the cryptocurrency market rapidly expands and the global financial landscape evolves, tax authorities worldwide are intensifying their efforts to maintain transparency and combat tax evasion,” they said.

“South Africa’s release of draft regulations for the CARF and updated CRS represents a significant advancement in compliance with international standards set by the Organisation for Economic Co-operation and Development (OECD).”

These proposed regulations aim to foster the automatic exchange of tax-related information concerning both traditional financial assets and emerging crypto-asset classes.

According to Baijoo and Paschini, the CARF regulations are instrumental in South Africa’s commitment to meet international tax standards.

At the same time, it will allow the South African Revenue Service (SARS) to pursue tax collection from the 5.8 million South African taxpayers engaging in crypto-related activities.

Approved by the OECD’s Committee on Fiscal Affairs in 2022 and 2023, CARF tackles the unprecedented global growth of crypto-asset use and its associated tax implications.

“The framework seeks to mitigate the erosion of tax transparency by mandating the automatic exchange of data linked to crypto assets across jurisdictions,” Baijoo and Paschini explained. Key components of the CARF regulations will include:

• Delineating which crypto assets are subject to reporting obligations
• Identifying the entities and individuals subject to data collection and specific reporting requirements
• Promoting tax transparency on reportable transactions
• Implementing iron-clad due diligence procedures and guidelines for identifying Crypto Asset Users and Controlling Persons, and their reporting obligations in relevant jurisdictions

Additionally, the CARF establishes a Multilateral Competent Authority Agreement (MCAA) to facilitate international data exchange and a standardised electronic reporting format.

Non-compliant taxpayers have nowhere to hide

Baijoo and Paschini explained that, together with the CARF, SARS has introduced draft amendments to the CRS. The CRS has served as the foundational global standard for automatic exchange of financial account information.

The revised CRS aims to include new financial products, intermediaries, and assets in its scope. This includes certain electronic money products and Central Bank Digital Currencies.

Baijoo and Paschini pointed out that SARS has long planned to investigate South African taxpayers’ offshore interests.

Foreign asset/income disclosure notices, entailing a blanket disclosure of offshore assets, have been issued as far back as 2020.

“The knock-on effect of this is the promotion of the automatic exchange of information, imposing a legal reporting obligation on the respective revenue authorities, by virtue of the provisions contained in the MCAA,” they said.

“At the time, many taxpayers may have thought best to hide the revenue authority’s request under their mattresses, but now, there appears to be no escape for the non-compliant South African taxpayer.”

Baijoo and Paschini warned that now is not the time to take risks, since the taxman’s approach clearly shows South Africans are dealing with a competent revenue authority.

“So why risk it when compliance is evidently the preferred way forward, which SARS is willing and ready to assist all taxpayers with, as advised by Commissioner Edward Kieswetter,” they said.

Kieswetter has stated that SARS will do its best to “make it easy and seamless for taxpayers when they transact with the organisation”.

Baijoo and Paschini said this statement shows that SARS is steadily aligning itself with international standards and climbing back to its former prestige as one of the world’s finest revenue authorities.

“Taxpayers involved in crypto transactions or holding digital assets should anticipate increased scrutiny and enhanced information sharing among tax authorities, emphasising the necessity for precise tax reporting and compliance,” they said.

Baijoo and Paschini said various legal solutions are available to taxpayers who want to fix historical non-compliance through voluntary information disclosure or ensure their current compliance record remains unblemished.

“The most proactive way to effect this disclosure is by means of a Voluntary Disclosure Programme (VDP) application,” they said.

The VDP application allows taxpayers to legally declare any undeclared income without being subject to the penalties which would generally stem from such non-disclosure.

“This is the 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, pinpointing a specific liability owed,” they said.

They added that, where taxpayers find themselves on the wrong side of SARS, there is a first-mover advantage.

“Where things do go wrong, SARS must be engaged legally, and we generally find them utmost agreeable where a correct tax strategy is followed,” Baijoo and Paschini cautioned.